Quantitative Easing, Collateral Constraints, and Financial Spillovers

The steady application of quantitative easing (QE ) has been followed by big and nonmonotonic effects on international asset prices and capital flows. We rationalize these observations in a model in which a central bank buys domestic assets that serve as the best collateral for investors worldwide. The crucial insight is that domestic private agents adjust their portfolios of domestic and foreign assets in different ways to offset QE, conditional on whether they are (i) fully leveraged, (ii ) partially leveraged, or (iii) unleveraged. These portfolio shifts can diminish or even reverse the impact of ever-larger QE interventions on asset prices. (JEL E31, E32, E43, E44, E52, E58, F34)

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Spillover Effect of Global Financial Cycle To Asset Markets in Asean-5 Countries: A Structural VAR Approach

AFEBI Economic and Finance Review ◽

10.47312/aefr.v2i02.97 ◽

2018 ◽

Vol 2 (02) ◽

pp. 1

Author(s):

Sri Andaiyani ◽

Telisa Aulia Falianty

Keyword(s):

Risk Aversion ◽

Capital Flows ◽

Asset Prices ◽

Emerging Market ◽

Structural Var ◽

Asset Markets ◽

Equity Prices ◽

Financial Cycle ◽

Property Prices ◽

The Impact

An upsurge and volatility of capital flows to Emerging Asian Economies indicated that there is the potential effect of global financial cycle to emerging market. It provides an overview of investor risk aversion in short term investment after financial crisis 2008. Global financial cycle could have a significant impact to asset prices, including equity prices and property prices. Rey (2015) has triggered an interesting discussion about global financial cycle. She found that there was a global financial cycle in capital flows, asset prices and credit growth. This cycle was co‐moves with the VIX, a measure of uncertainty and risk aversion of the markets. Therefore, this study attempts to analyze empirically global financial cycle shocks, measured by the VIX, on equity prices and property prices in ASEAN-5, namely Indonesia, Malaysia, Singapore, Thailand and Philippines. We estimate quarterly frequency data from Q1 1990 to Q2 2016 with Structural Vector Autoregressive (SVAR) approach. The result of this study showed that global financial cycle has a negative significant impact on the ASEAN-5 asset markets, in spite of the response of shock differs by country and size. This result is consistent with ASEAN-5 as small open economies that remain vulnerable to the global factor. This study contributes to the literature in several ways. First, we identify not only cyclical expansions or contraction in asset markets but also the impact of global financial cycle to asset markets in ASEAN-5 countries. Second, we investigate whether there are heterogeneous responses of ASEAN-5 countries to global financial cycle shocks. Third, we also identify the pattern of cycle in ASEAN-5 countries.JEL Classification: F30, F37, F42Keywords: ASEAN, Asset Markets, Global Financial Cycle, SVAR

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Quantitative Easing in the Euro Area: The Dynamics of Risk Exposures and the Impact on Asset Prices.

SSRN Electronic Journal ◽

10.2139/ssrn.2836353 ◽

2016 ◽

Cited By ~ 20

Author(s):

Ralph S. J. Koijen ◽

Francois Koulischer ◽

Benoot Nguyen ◽

Motohiro Yogo

Keyword(s):

Euro Area ◽

Asset Prices ◽

Quantitative Easing ◽

The Impact

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Pre- and Post-GFC Policy Multipliers

IMF Working Papers ◽

10.5089/9781513561097.001 ◽

2020 ◽

Vol 20 (237) ◽

Author(s):

Sam Ouliaris ◽

Celine Rochon

Keyword(s):

Central Bank ◽

Interest Rates ◽

Balance Sheet ◽

Quantitative Easing ◽

Dynamic Effects ◽

Real Gdp ◽

Rate Environment ◽

The Impact ◽

Policy Multipliers ◽

The U.S

This paper estimates the change in policy multipliers in the U.S. relative to their pre-2008 financial crisis levels using an augmented Blanchard-Perotti model to allow for the dynamic effects of shocks to the central bank balance sheet, real interest rates and debt levels on economic activity. Given the elevated debt level and significantly larger central bank balance sheet in the U.S. after 2008, the paper estimates the likely impact of new stimulus packages. We find that expenditure multipliers have fallen post-2008 crisis because of higher government debt, implying that the effectiveness of fiscal policy has declined. The analysis also investigates the impact of quantitative easing. The results suggest that it is beneficial, but requires sizable balance sheet interventions to lead to noticeable effects on real GDP. The results are used to assess the impact of the policy packages to address COVID-19. Because of rising debt stocks, dealing with a crisis is becoming more and more costly despite the current low interest rate environment.

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ASEAN CREDIT GROWTH AND ASSET PRICE RESPONSE TO GLOBAL FINANCIAL CYCLE

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v20i2.812 ◽

2017 ◽

Vol 20 (2) ◽

pp. 203-228

Author(s):

Sri Andaiyani ◽

Telisa Aulia Falianty

Keyword(s):

Risk Aversion ◽

Capital Flows ◽

Asset Prices ◽

Emerging Market ◽

Asset Markets ◽

Credit Growth ◽

Equity Prices ◽

Financial Cycle ◽

Property Prices ◽

The Impact

An upsurge and volatility of capital flows to Emerging Asian Economies indicated that there is the potential effect of global financial cycle to emerging market. It provides an overview of investor risk aversion in short term investment after financial crisis 2008. Global financial cycle could have a significant impact not only to credit growth but also asset prices, including equity prices and property prices. Rey (2015) has triggered an interesting discussion about global financial cycle. She found that there was a global financial cycle in capital flows, asset prices and credit growth. This cycle was co-moves with the VIX, a measure of uncertainty and risk aversion of the markets. Therefore, this study attempts to analyze empirically global financial cycle shocks, measured by the VIX, on credit, equity prices and property prices in ASEAN-4, namely Indonesia, Malaysia, Singapore, and Thailand. We estimate quarterly frequency data from Q1 1990 to Q2 2016 with Panel Vector Autoregressive (PVAR) approach. The result of this study showed that the response of asset markets and credit to global financial cycle shocks is negative. This result is consistent with ASEAN-4 as small open economies that remain vulnerable to the global factor. This study contributes to the literature in several ways. First, we identify not only cyclical expansions orcontraction in asset markets but also the impact of global financial cycle to credit growth and asset markets in ASEAN-4 countries. Second, we also identify the pattern of cycle in ASEAN-4 countries. Third, we used PVAR approach that can capture heterogeneity.

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The Impact of the ECB’s Quantitative Easing Policy on Capital Flows in the Cesee Region

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2018-0011 ◽

2018 ◽

Vol 7 (2) ◽

pp. 25-48 ◽

Cited By ~ 2

Author(s):

Anita Angelovska-Bezhoska ◽

Ana Mitreska ◽

Sultanija Bojcheva-Terzijan

Keyword(s):

Capital Flows ◽

Balance Sheet ◽

Capital Inflows ◽

Eastern Region ◽

Quantitative Easing ◽

Fiscal Policies ◽

Trade And Financial Linkages ◽

The Government ◽

Almost All ◽

The Impact

Abstract This paper attempts to empirically assess the impact of the ECB’s quantitative easing policy on capital flows in the countries of the Central and South Eastern region. Given the tight trade and financial linkages of the region with the euro area, one should expect that the buoyant liquidity provided by the ECB might affect the size of the capital inflows. We test this hypothesis by employing panel estimation on a sample of 14 countries CESEE countries for the 2003-2015 period. Contrary to the expected outcome, the results reveal either negative or insignificant impact of the change in the ECB balance sheet on the different types of capital inflows. The results suggest that the magnitude of the crisis, to which the ECB responded to was immense, hence precluding any significant impact of the monetary easing on capital flows in the region. The inclusion of a dummy in the model, to control for the 2008 crisis confirms the findings from the first specification and also does not change the finding on the ECB quantitative easing impact on the capital flows. The impact of the crisis dummy on capital flows is negative and it holds for almost all types of capital inflows, except for the government debt flows, which is consistent with the countercyclical fiscal policies and rising public debt after the crisis.

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The impact of central bank policy on transport asset prices: Evidence from the US airline industry

Research in Transportation Business & Management ◽

10.1016/j.rtbm.2021.100649 ◽

2021 ◽

pp. 100649

Author(s):

Joseph B. Sobieralski

Keyword(s):

Central Bank ◽

Airline Industry ◽

Asset Prices ◽

The Us ◽

The Impact

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The Impact of Quantitative Easing on Emerging Markets – Literature Review

e-Finanse ◽

10.2478/fiqf-2018-0028 ◽

2018 ◽

Vol 14 (4) ◽

pp. 67-76

Author(s):

Piotr Bartkiewicz

Keyword(s):

Emerging Markets ◽

Large Scale ◽

Empirical Literature ◽

Quantitative Easing ◽

Methodological Choices ◽

The Subject ◽

Methodological Approaches ◽

The Impact ◽

Sufficient Precision

AbstractThe article presents the results of the review of the empirical literature regarding the impact of quantitative easing (QE) on emerging markets (EMs). The subject is of interest to policymakers and researchers due to the increasingly larger role of EMs in the world economy and the large-scale capital flows occurring after 2009. The review is conducted in a systematic manner and takes into consideration different methodological choices, samples and measurement issues. The paper puts the summarized results in the context of transmission channels identified in the literature. There are few distinct methodological approaches present in the literature. While there is a consensus regarding the direction of the impact of QE on EMs, its size and durability have not yet been assessed with sufficient precision. In addition, there are clear gaps in the empirical findings, not least related to relative underrepresentation of the CEE region (in particular, Poland).

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