ECB policy and Eurozone fragility: Was De Grauwe right?

Saka, Orkun; Fuertes, Ana-Marı́a; Kalotychou, Elena

doi:10.1016/j.jimonfin.2015.03.002

Cited by 59 publications

(10 citation statements)

References 21 publications

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“…Since the largest intensity of negative news concerning Spain was observed in the middle of 2010, in the autumn of 2011 and the first half of 2012, a significant increase in the volatility of shocks generated by Spain in these periods was in line with expectations. After the announcement about the OMT program by the European Central Bank in July 2012, the situation of the financial markets in the peripheral euro-area countries calmed down, which is in agreement with findings of other studies [40][41][42][43].…”

Section: Resultssupporting

confidence: 90%

Givers or Recipients? Co-Movements between Stock Markets of CEE-3 and Developed Countries

Grabowski

2019

Sustainability

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In this paper, time-varying co-movements between the stock markets of Poland, the Czech Republic, Hungary, and the capital markets of developed countries in stable and crisis periods are studied. The parameters of the VAR-AGDCC-GARCH (Vector Autoregressive- Asymmetric Generalized Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroscedasticity) model are estimated, and volatility spillovers are calculated. The evidence suggests that the level of correlation between stock return shocks of Central and Eastern European countries increased significantly in the period of financial turmoil and was high in the period of the US sub-prime crisis, as well as during the euro area sovereign debt crisis. After the announcement of the OMT (Outright Monetary Transactions) program, the evolution of the stock market indices in Central and Eastern Europe countries (CEECs) have followed different paths. An analysis of the volatility spillovers indicates that CEECs are the recipients of volatility. In the period of 2004–2019, they received much volatility—from Germany and the US, in particular. They also received much volatility from Spain during the euro area sovereign debt crisis. After 2012, volatility transmission to Poland, the Czech Republic, and Hungary dropped significantly.

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Section: Resultssupporting

confidence: 90%

Givers or Recipients? Co-Movements between Stock Markets of CEE-3 and Developed Countries

Grabowski

2019

Sustainability

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“…The improvement in the sentiment in the government bond market of the euro area coincided with the announcement of the OMT programme. Similar conclusions can be drawn from the study by Saka et al (2015), who showed that market perception of overall euro area credit risk decreased under the OMT programme. Altavilla et al (2014) show that in the months following the announcement of the OMT programme, there was a decline in government bond yields, the overall situation in the financial markets improved, and the dependence of the euro area banking system on the Eurosystem's refinancing decreased.…”

Section: Literature Overviewsupporting

confidence: 87%

“…Long-term effects of the announcement of the OMT programme were, among others, confirmed in the studies of De Grauwe and Ji, 2014; Altavilla et al, 2014; 1 and Saka et al, 2015. As indicated by the first of these authors, a marked decline in government bond yields in the peripheral EMU countries since the third quarter of 2012 did not result from improving their macroeconomic fundamentals, but was determined by positive market sentiment.…”

Section: Literature Overviewmentioning

confidence: 71%

“…The cited studies demonstrated its short-term impact (the analysis was conducted in the event windows of 2, 3 and 5 days). Long-term effects of the OMT programme in the form of reduced bond yields were confirmed in the works of De Grauwe and Ji (2014) as well as Saka et al (2015). However, the authors of these studies did not attempt to examine whether and -if so -to what extent the parameters reflecting the effect of macroeconomic fundamentals on the yields changed under the programme compared to the period of crisis until the second quarter of 2012.…”

Section: Introductionmentioning

confidence: 94%

See 1 more Smart Citation

Sovereign Bond Spreads in the EMU Peripheral Countries. The Role of the Outright Monetary Transactions

Grabowski¹,

Stawasz²

2017

Prague Economic Papers

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The paper examines determinants of sovereign bond spreads (in relation to Germany) of the peripheral euro area countries in the period 2007Q3-2015Q3. The study indicates that the introduction of the Outright Monetary Transactions (OMTs) by the ECB in the third quarter of 2012 led to a change in the sensitivity of the spreads to the developments of certain macroeconomic fundamentals of these economies. In particular, the ratio of public debt to GDP, which significantly and strongly determined the spreads in the period 2007Q3-2012Q2, proved to be insignificant in the period 2012Q3-2015Q3. In addition, the counterfactual analysis carried out shows that the spreads in the analysed countries would have been much higher if the ECB had not decided to introduce this programme.

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“…Shortly after Draghi's speech, on August 2, the Outright Monetary Transactions (OMT) framework was announced, which became operational on 6 September 2012. In the popular press it has been widely claimed that these actions have indeed calmed the Eurozone sovereign debt markets, a conclusion also supported, for example, by De Grauwe and Ji (2013) and Saka, Fuertes, and Kalotychou (2015).…”

Section: Introductionmentioning

confidence: 90%

‘Whatever it takes’ and the role of Eurozone news

Heijden

Beetsma

Romp

2017

Applied Economics Letters

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This letter shows that the 'Whatever it takes' speech by ECB President Draghi on 26 July 2012 and the ensuing installation of the Outright Monetary Transactions' framework are associated with a reduction in the domestic and cross-border effect of Eurozone news on absolute yield changes in Eurozone sovereign debt. These results are consistent with the popular view that these actions helped to avoid a collapse of the Eurozone.

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ECB policy and Eurozone fragility: Was De Grauwe right?

Abstract: This is the other version of the paper.This version of the publication may differ from the final published version. Permanent repository link:

Cited by 59 publications

References 21 publications

Givers or Recipients? Co-Movements between Stock Markets of CEE-3 and Developed Countries

Givers or Recipients? Co-Movements between Stock Markets of CEE-3 and Developed Countries

Sovereign Bond Spreads in the EMU Peripheral Countries. The Role of the Outright Monetary Transactions

‘Whatever it takes’ and the role of Eurozone news

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