In this paper, we construct a single composite financial stress indicator (FSI) which aims to predict developments in the real economy in the euro area. Our FSI contains financial variables that have a causal relationship with the real economy. Therefore, our FSI is able to serve as an early warning indicator for negative impacts of financial stress on the real economy.The causal relationship between our FSI and the real economy is tested and confirmed by the error-correction models. An empirical analysis reveals that our FSI has more predictive power than the bench-mark normally used for financial markets, especially stock markets, namely the Euro STOXX 50 volatility index for the recent banking crisis and the euro-area sovereign debt crisis. One of the main empirical results is that our FSI shows negative effects from financial markets on the real economy one to four months in advance. Nicht-technische Zusammenfassung AbstractIn this paper, we construct a single composite financial stress indicator (FSI) which aims to predict developments in the real economy in the euro area. Our FSI was shown to perform better than the Euro STOXX 50 volatility index for the recent banking crisis and the euro-area sovereign debt crisis and to be able to serve as an early warning indicator for negative impacts of financial stress on the real economy.

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The Eurosystem purchased e178 billion of corporate bonds between June 2016 and December 2018 under the Corporate Sector Purchase Programme (CSPP). Did these purchases lead to a deterioration of liquidity conditions in the corporate bond market, thus raising concerns about unintended consequences of large-scale asset purchases? To answer this question, we combine the Bundesbank's detailed CSPP purchase records with a range of liquidity indicators for both purchased and nonpurchased bonds. We find that while the flow of purchases supported secondary market liquidity, liquidity conditions deteriorated in the long-run as the Bundesbank reduced the stock of corporate bonds available for trading in the secondary market.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIn this analysis the interdependence between foreign exchange markets and stock markets for selected accession and cohesion countries is discussed. This includes basic theoretical approaches. Monthly data for the nominal stock market indices and nominal exchange rates are used, where Ireland, Portugal, Spain, Greece, Poland, Czech Republic, Slovenia, and Hungary are included in the analysis. From the cointegration analysis and VAR analysis both long-term links and short-term links for Poland are identified. Conversely, for Slovenia, Hungary, Ireland, Spain, and Greece merely shortterm links resulted. Surprisingly, the direction of causation is unambiguously from the stock market index to the exchange rate for all six countries considered. JEL classifications: G15, F31, E44

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