Spillover of European unconventional monetary policy to the trader partners of euro area

A GVAR approach

Résumé

We focus in this paper on the spillover effects of Unconventional Monetary Policy (UMP) of European Central Bank (ECB) on economic partners of the Euro Area. One of the main motivations of our analysis is that, while several papers have investigated the domestic and international impact of the UMP of the US and Japan there are comparatively less papers about the ECB’s monetary policies and their spillover. The use of UMP by ECB has an important effect on the monetary policy of the Euro Area and regarding the strong trade and financial linkages between the Euro Area and neighboring countries, an analysis of spillover is then highly relevant.

This study considers several countries who are excluded from previous analysis like Tunisia and Turkey. The main purpose is to provide a comparative analysis of the spillover impact of these policies from a group of countries to another. To do this, we use a multi-country dataset to set up a Global-VAR (GVAR) model. Our results validate the transmission from the Euro Area toward its trade partners whatever the degree of their financial openness was. We note the heterogeneity of the response from an economy to another.