The ECB’s unconventional monetary policy announcements

: cross-border spillover effects on the Scandinavian markets

Abstract

Domestic monetary policies have always had domestic spillover effects. With a global market that experienced trends of instability and distress following the 2008 financial crisis, the European Central Bank introduced several unconventional monetary policy (UMP) measures as a counter acting force. Through recent times until 2019, over 136 cases of UMPs have been announced through press conferences, press releases, and speeches given by the ECB. Despite these measures being supportive elements during challenging economic events specific to the euro area, several studies document spillover effects on foreign asset prices and output effects on non-euro European markets. In this dissertation, through conducting an event study approach, we examine the impacts, and through which channels the ECB UMP announcements spill over to the Scandinavian markets (of Norway, Sweden, and Denmark). Using a range of domestic financial variables, it is found to have significantly strong impacts on equity prices and longer-term bond yields. Further, by extract ing monetary policy surprises from a factor analysis of the euro yield curve, we find broad evidence of spillovers through the signaling channel before the ECB key interest rates hit the zero lower bound. As the euro area enters the ZLB, the spillovers to Scandinavian countries are mitigated.

Date of Award	6 Jul 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Carla Sofia Soares (Supervisor)