Abstract
One of the responses of the monetary policies of central banks to the sustainable development on financial markets, which also affected other markets and economic growth, is the role of non-standard monetary policies, referred to as quantitative easing in the form of Asset Purchase Programme. In this paper, the following main research problem was addressed: How can the Asset Purchase Programme help the European Central Bank fulfill its mandate of supervising the financial stability and financial development? Based on this, we formulated the main objective: to identify the impact of monetary policies on the dynamics of financial markets development, labor markets, and the markets for goods and services. As part of the applied methodology, the impact of the quantitative easing on the government bond yields curve was based on an indirect assessment using the seemingly unrelated regression model, considering the use of parameters from the functional benchmark form. Through the vector error correction model, another additional impact of the application of the monetary policy mechanisms on selected indicators of the considered markets was identified. The relationship between financial markets and economic growth was determined on the basis of the two-stage least square model using endogeneity control instruments. Applying the changes identified by the above models allowed us to determine the expected change in the rate of growth of the aggregate output of the euro area countries. Based on our results, we found out that Asset Purchase Programme had an impact on the growth of government bond yields issued by euro area countries, on lowering the risk rate on corporate bond markets, and increasing the nominal value of shares. In addition, growth in inflation and a decline in interest rates were affected. Finally, the European Central Bank (ECB)’s non-standard monetary policies have positively affected and stimulated the labor market and development in goods and services markets, referred to the sustainable financial development.
Highlights
The concept of sustainable development is based on three known pillars: sustainable economic growth, social inclusion, and environmental protection have been recognized as fundamental in the development processes in all the EU countries, according The Agenda 2030 for sustainable development.The European Central Bank as the supreme institution of the EU has a clear mandate—sustaining financial development and price stability in the EU, using its monetary policies and mechanisms.Quantitative easing is characterized as a monetary policy of redemption of assets funded by the central bank’s provisions, which was first introduced by [1,2] to name the Bank of Japan policy conducted between 2001 and 2006
The Business confidence index, we considered only within the level and slope based on the step-wise selection of predictors within the compiled seemingly unrelated regression (SUR) model, with this index increasing the level of government bond yields, with their gradual decline
We focus on the independent variable Fed funds rates, which affects the growth of government bond yields, causing a slowdown in yield changes in the short term due to their maturity
Summary
The European Central Bank as the supreme institution of the EU has a clear mandate—sustaining financial development and price stability in the EU, using its monetary policies and mechanisms. Quantitative easing is characterized as a monetary policy of redemption of assets funded by the central bank’s provisions, which was first introduced by [1,2] to name the Bank of Japan policy conducted between 2001 and 2006. Many central banks have used outright purchases as part of their monetary policies. It has been employed by the Federal Reserve Board, the Bank of England, and the Bank of Japan. Open market operations are a core instrument of central banks even in standard times
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