The Impact of Pessimistic Expectations on the Effects of COVID‐19‐Induced Uncertainty in the Euro Area

Volatility is the most widespread measure of risk. Volatility modeling allows investors to capture potential losses and investment opportunities. This work aims to examine the impact of the two waves of COVID-19 infections on the return and volatility of the stock market indices of the euro area countries. The study also focuses on other important aspects such as time-varying risk premium and leverage effect. This investigation employed the Threshold GARCH(1,1)-in-Mean model with exogenous dummy variables. Daily returns of the euro area stock markets indices from 4th January 2016 to 31st December 2020 has been used for the analysis. The results reveal that euro area stock markets respond differently to the COVID-19 pandemic. Specifically, the first wave of COVID-19 infections had a notable impact on stock market volatility of euro area countries with middle-large financial centres while the second wave had a significant impact only on stock market volatility of Belgium.

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The impact of the ECB’s asset purchase programme on euro area equities

The Quarterly Review of Economics and Finance ◽

10.1016/j.qref.2021.09.010 ◽

2021 ◽

Vol 82 ◽

pp. 270-279

Author(s):

Jorge Bento Farinha ◽

José Vidrago

Keyword(s):

Euro Area ◽

The Impact

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The Impact of Global Value Chains on the Euro Area Economy

SSRN Electronic Journal ◽

10.2139/ssrn.3381697 ◽

2019 ◽

Author(s):

Ettore Dorrucci ◽

Vanessa Gunnella ◽

Alexander Al-Haschimi ◽

Konstantins Benkovskis ◽

Francesco Chiacchio ◽

...

Keyword(s):

Euro Area ◽

Global Value Chains ◽

Value Chains ◽

The Impact

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Monetary Policy Surprises over Time

Quarterly Journal of Finance ◽

10.1142/s2010139218400025 ◽

2018 ◽

Vol 08 (01) ◽

pp. 1840002 ◽

Cited By ~ 1

Author(s):

Marcello Pericoli ◽

Giovanni Veronese

Keyword(s):

Monetary Policy ◽

Financial Markets ◽

Interest Rates ◽

Euro Area ◽

Yield Curve ◽

Sovereign Spreads ◽

Definition Of ◽

Term Premia ◽

The Impact ◽

Over Time

We document how the impact of monetary surprises on euro-area and US financial markets has changed from 1999 to date. We use a definition of monetary policy surprises, which singles out movements in the long-end of the yield curve — rather than those changing nearby futures on the central bank reference rates. By focusing only on this component of monetary policy, our results are more comparable over time. We find a hump-shaped response of the yield curve to monetary policy surprises, both in the pre-crisis period and since 2013. During the crisis years, Fed path-surprises, largely through their effect on term premia, account for the impact on interest rates, which is found to be increasing in tenor. In the euro area, the path-surprises reflect the shifts in sovereign spreads, and have a large impact on the entire constellation of interest rates, exchange rates and equity markets.

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Post-communist countries of the EU and the euro: Dynamic linkages between exchange rates

Acta Oeconomica ◽

10.1556/032.2017.67.4.2 ◽

2017 ◽

Vol 67 (4) ◽

pp. 511-538 ◽

Cited By ~ 3

Author(s):

Nikolaos Stoupos ◽

Apostolos Kiohos

Keyword(s):

Czech Republic ◽

Exchange Rates ◽

Euro Area ◽

Sovereign Debt ◽

Debt Crisis ◽

Monetary Integration ◽

The Czech Republic ◽

The Impact ◽

The Eu ◽

Dynamic Linkages

The sovereign debt crisis of 2010 in the euro area significantly decelerated the monetary integration of the EU. The main purpose of this paper is to explore whether five post-communist member states of the EU are mature enough to adopt the euro. We used nominal exchange rates in the error correction model with asymmetric power ARCH (ECM-APARCH). Our results highlight that EU membership positively increased the impact of the euro on the currency of each of these countries in the short-run. In contrast, the long-term effect of the euro on each currency is negative for the Czech Republic, Hungary, and Croatia. Wholly different results were obtained for Poland and Romania. The APARCH model showed that the negative responses of the euro had a greater or neutral effect on the conditional variance of each currency instead of the positive responses. The debt crisis of the euro area had no impact on the dynamic linkages between the currencies. Our research concludes that Croatia, the Czech Republic, and Hungary are not ready to join the euro area in the near future. On the other hand, the currencies of Poland and Romania are already aligned with the fluctuations of the euro.

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The macroeconomic impact of shocks to bank capital buffers in the Euro Area

The B E Journal of Macroeconomics ◽

10.1515/bejm-2018-0009 ◽

2019 ◽

Vol 20 (1) ◽

Cited By ~ 2

Author(s):

Derrick Kanngiesser ◽

Reiner Martin ◽

Laurent Maurin ◽

Diego Moccero

Keyword(s):

Euro Area ◽

Banking Sector ◽

Global Financial Crisis ◽

Decomposition Analysis ◽

Bank Lending ◽

Empirical Literature ◽

Bank Capital ◽

Macroeconomic Impact ◽

The Global Financial Crisis ◽

The Impact

Abstract While the global financial crisis revealed a need for macroprudential policy tools to mitigate the build-up of risk in the financial system, the impact of such policies on the banking sector and the macroeconomy remains largely uncertain. We contribute to the empirical literature that estimates the impact of shocks to bank capital buffers on bank lending and the macroeconomy by estimating a Bayesian VAR model identified with sign restrictions. We use bank-level data for large euro area listed banks to construct an aggregate bank capital buffer for the euro area, which is included as another variable in the model. We estimate three shocks affecting the euro area economy, namely a demand shock, a monetary policy shock and a shock to bank capital buffers. We find that banks curtail lending and reduce their relative exposure to riskier assets in response to a shock to the bank capital buffer. Historical shock decomposition analysis shows that shocks to bank capital buffers have contributed to impair bank lending growth and to widen bank lending spreads, hence depressing economic activity.

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