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Working Paper
Global financial market impact of the announcement of the ECB's extended asset purchase programme
We estimate the impact of the ECB?s announcement of the extended asset purchase programme (EAPP) on 22 January 2015 on global equity prices, bond yields and the euro exchange rate. We find that the EAPP announcement benefited global financial markets by boosting equity prices in the euro area and the rest of the world. At the same time, the EAPP announcement caused a depreciation of the euro vis--vis advanced and emerging market economy currencies. Comparing the EAPP to previous ECB announcements of unconventional monetary policies, the main channel of transmission of the EAPP announcement to ...
Working Paper
Does a Big Bazooka Matter? Central Bank Balance-Sheet Policies and Exchange Rates
We estimate the effects of quantitative easing (QE) measures by the ECB and the Federal Reserve on the US dollar-euro exchange rate at frequencies and horizons relevant for policymakers. To do so, we derive a theoretically-consistent local projection regression equation from the standard asset pricing formulation of exchange rate determination. We then proxy unobserved QE shocks by future changes in the relative size of central banks? balance sheets, which we instrument with QE announcements in two-stage least squares regressions in order to account for their endogeneity. We find that QE ...