Monetary Policy Research

The focus of my academic research is on unconventional monetary policies. This repository contains my research on the spillover effects of the ECB’s unconventional monetary policies on Central and Eastern Europe (CEE) as well as the Middle East and North Africa (MENA).

My research with Theocharis Grigoriadis on the spillovers to the CEE region was recently published in Comparative Economic Studies.

Unconventional Monetary Policy Spillover Effects

Since the Global Financial Crisis and the development of unconventional monetary measures, spillover effects from monetary policies in large advanced economies to emerging market economies (EME) have become the subject of considerable debate and a focal point of criticism from policy makers in EMEs. But how are such spillover effects transmitted from one economy to another? And, what consequences do they have for foreign economies? This research investigates the international transmission of the European Central Bank’s (ECB) unconventional monetary policies and their spillover effects to Central and Eastern Europe (CEE) and the Middle East and North Africa (MENA).

Middle East and North Africa

Using a simple pooled OLS panel regression model with dummy variables corresponding to ECB monetary policy announcements, this paper seeks to identify spillover effects to a series of financial variables in Middle East and North African (MENA) countries over the period 2008-01-03 to 2017-12-29.

Countries of interest: Algeria, Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, Turkey, United Arab Emirates, Yemen

Financial variables of interest:

• Foreign Exchange Rates
• Stock Market Indices
• Interbank lending rates (3 months)
• Credit Default Swaps (5 year and 10 year maturities)

ECB Monetary Policy Programs:

• Liquidity providing

  • long-term refinancing operations (LTRO)

  • targeted longer-term refinancing operations (TLTRO)

• Asset Purchases

  • covered bond purchase program (CBPP1, CBPP2, CBPP3)

  • securities markets program (SMP)

  • outright monetary transactions (OMT)

  • public sector purchase program (PSPP)

Data

Missingness

The largest challenge in conducting this analysis is data availability. The use of monetary policy announcement dummy variables on a 1-day window requires daily data for all financial variables of interest. For many countries, only a subset of the financial variables of interest are fully available for the full sample period (2008-01-03 to 2017-12-29). The following chart shows the “missingness” of each variable across all MENA countries.In order to maintain fully balanced panel data samples, only series with no missing values on the sample period were selected for the regressions.

Linear Panel Model

The general form of a pooled OLS model can be described through the following specification:

Central and Eastern Europe

The following country-specific regression was estimated using daily data over the period 02.01.2009 – 31.12.2017 for 11 CEE countries:

where Y takes on the values of exchange rate vis-à-vis the euro, stock market index, 3-month interbank lending rate, 3- and 10-year sovereign bond yields as well as 5- and 10-year credit default swap spreads. The euro area volatility index is included as EuroVIX to control for periods of high volatility which may have impacted financial markets in REE economies. IR represents the interest rate on the ECB’s marginal lending facility. MP contains the dummy related to the ECB’s and Federal Reserve’s unconventional monetary policy announcements, respectively. EC contains dummy variables for the European Commision’s fiscal policy programs.

Countries of interest: Bulgaria, Croatia, Czechia, Hungary, Latvia, Poland, Romania, Russia, Serbia.