The Impact of the ECB’s Conventional and Unconventional Monetary Policies on Stock Markets

The Impact of the ECB’s Conventional and Unconventional Monetary Policies on Stock Markets

Title:

The Impact of the ECB’s Conventional and Unconventional Monetary Policies on Stock Markets

Number:

16/05

Author(s):

Reinder Haitsma, Deren Ünalmış, Jakob de Haan

Language:

English

Date:

February 2016

Abstract:

Using an event study method, we examine how stock markets respond to the policies of the European Central Bank during 1999-2015. We use market prices of futures (government bonds) to identify surprises in (un)conventional monetary policy. Our results suggest that especially unconventional monetary policy surprises affect the EURO STOXX 50 index. We also find evidence for the credit channel, notably for unconventional monetary policy surprises. Our results also suggest that value and past loser stocks show a larger reaction to monetary policy surprises. These results are confirmed if identification of monetary policy surprises is based on the Rigobon-Sack heteroscedasticity approach.

Keywords:

Monetary policy surprises, Stock prices, Event studies approach, Identification through heteroscedasticity

JEL Codes:

E43; E44; E52

The Impact of the ECB’s Conventional and Unconventional Monetary Policies on Stock Markets
CENTRAL BANK OF THE REPUBLIC OF TURKEY Head Office Anafartalar Mah. İstiklal Cad. No:10 06050 Ulus Altındağ Ankara Phone : (+90 312) 507 50 00 | Fax : (+90 312) 507 56 40