Unconventional Policy Announcements Research Articles

US and EU unconventional monetary policy spillover on BRICS financial markets: an event study

This paper examines the effects of monetary authorities in Europe and US unconventional policy announcements on emerging stock markets (BRICS). An event study methodology is used to analyse the impact on the sectors of interest: consumer, financials, and materials. The analysed abnormal returns are significant during some events and are also dependent on the announcing central bank authority, as well as the sector and country investigated, linking the announcements to spillover effects in those countries. In terms of differing magnitude effects regarding the announcements of the central banks, no significant pattern was found. However, magnitudes seem to be unexpectedly, but not always significantly, higher during FED statements.

Monetary Policy Transmission to Russia and Eastern Europe

In this paper, we argue that the ECB’s unconventional monetary policy announcements have generated significant spillover effects in Russia and Eastern Europe. The hypothesis is tested using OLS estimations of event-based regressions on monetary policy event dummies and seven financial variables in eleven East European countries including Russia. Overall, the empirical results associate the ECB’s unconventional policy announcements with the appreciation of East European currencies, rising stock market indices as well as falling long-term government bond yields and lower sovereign CDS spreads in Eastern Europe and Russia. Bilateral integration with the eurozone is a key determinant of the strength of spillovers, with spillovers strongest in non-euro EU countries and weakest in non-EU East European countries. Furthermore, we find differentiated strength of spillovers to Russia compared to other non-EU East European countries, which we attribute to its fixed exchange rate regime. We also argue for the presence of portfolio rebalancing and confidence transmission channels.