Search Results (3)

This study assesses the effects of the European Central Bank’s (ECB) unconventional monetary policy (UMP) on the prices of selected European stock market indices during the European sovereign debt (2010–2012) and the COVID-19 pandemic (2020–2022) crises interventions. This research employs the instrumental variables (IV) two-stage least squares (2SLS) model approach to evaluate the effects of changes in the size of the ECB’s balance sheet on the pricing of key equity market indices in Europe. The results of this study suggest that the ECB’s asset value expansion had the opposite statistically significant effects on the European stock market indices’ prices between the interventions. That is, an increase in the ECB’s balance sheet size was associated with a decrease in the prices of the indices during the sovereign debt crisis and with a rise during the COVID-19 pandemic. This research pinpoints the price sensitivity of each of the European equity indices to the ECB’s UMP and determines the different outcomes of the ECB’s quantitative easing policy between the interventions. Full article

This study aims to analyse and investigate the most important factors affecting the performance of listed firms in the Athens Stock Exchange, emphasising capital structure, size and sovereign debt rate as a proxy for firms’ borrowing rate. Yet, the most remarkable factor taken into consideration to affect firms’ profitability is the delta of ECB assets as a proxy of the ECB’s strategy during the financial crisis. Indeed, the examination of the ECB’s delta is innovative for such analysis and differentiates this study from previous ones. The survey was conducted for the period 2005–2019, and the sample consisted of 49 firms from all sectors of the economic activity, except for the financial sector, as its companies’ capital structure is subject to supervisory restrictions. Thus, the financial sector’s inclusion in the sample would affect its homogeneity. The sample is divided into two sub periods, based on the statement of ECB’s president Mario Draghi “Whatever it takes,” in 2012, expressing the ECB’s strategy for backing and boosting the Eurozone economy. The empirical approach of our analysis is based on a panel data analysis, which allows the combination of both cross-section and time series data. In addition, we develop, test and analyse four specifications of our main model, each one with a different dependent variable as a proxy for profitability. These variables are EPS (earnings per share), ROE (return on equity), ROA (return on assets) and TOBIN’s Q. Our findings lead to some very interesting conclusions, which in most cases are consistent for the specification of all the examined models. More specifically, the results show a negative influence of debt-to-equity ratio and 10-year Greek yield bond on firms’ profitability regardless of the proxy used (EPS, ROE or TOBIN’s Q), while there is a positive impact of firms’ size and the delta of ECB’s total assets on firms’ profitability. However, the soundest outcome of this study shows that the expansion of the ECB’s balance sheet and the unconventional policy does contribute to the improvement of firms’ performance and economic stability. The findings become even more impressive, considering the turning of ECB’s strategy after the implementation of the unconventional policy in 2012. Our findings are useful for policymakers of international institutions and government authorities as we propose strategies favouring economic stability and economic activity but also for managers and stakeholders who can identify the factors which determine firms’ performance in order to apply the best policies for financing, investments and growth. Full article

Starting in June 2014, the European Central Bank (ECB) stepped up its monetary accommodation in order to counter a too prolonged period of low inflation in the euro area. This article offers a narrative of the monetary policy measures taken up to December 2016 and a review of the effects of ultra-low interest rates. The exceptional monetary stimulus transmitted to the economy broadly as intended. Moreover, it enhanced the financial capacity of economic agents to bear risks. At the same time, the ECB and the European micro- and macro-prudential authorities remained watchful of the unintended side-effects of an extended period of very low or negative interest rates for financial intermediation, financial stability and market discipline and took preventive or corrective measures as appropriate. A joint plan of action carried out by the 19 member countries with the aim to speed up balance sheet repair, accelerate the economic recovery and achieve higher productivity growth could have contributed to a more effective euro area macroeconomic and financial policy mix. Full article