Advertisement

Real Implications of Quantitative Easing in the Euro Area: A Complex-Network Perspective

  • Chiara PerilloEmail author
  • Stefano Battiston
Conference paper
Part of the Studies in Computational Intelligence book series (SCI, volume 689)

Abstract

The long-lasting socio-economic impact of the global financial crisis has questioned the adequacy of traditional tools in explaining periods of financial distress as well as the adequacy of the existing policy response. In particular, the effect of complex interconnections among financial institutions on financial stability has been widely recognized. A recent debate focused on the effects of unconventional policies aimed at achieving both price and financial stability. In particular, Quantitative Easing (QE, i.e., the large-scale asset purchase programme conducted by a central bank upon the creation of new money) has been recently implemented by the European Central Bank (ECB). In this context, two questions deserve more attention in the literature. First, to what extent, by injecting liquidity, the QE may alter the bank-firm lending level and stimulate the real economy. Second, to what extent, the QE may also alter the pattern of intra-financial exposures among financial actors (including banks, investment funds, insurance corporations and pension funds) and what are the implications in terms of financial stability. Here, we address these two questions by developing a methodology to map the macro-network of financial exposures among institutional sectors across financial instruments (i.e., equity, bonds and loans) and we illustrate our approach on recently available data (i.e., data on loans and private and public securities purchased within the QE). We then test the effect of the implementation of ECB’s QE on the time evolution of the financial linkages in the macro-network of the euro area as well as the effect on macroeconomic variables, such as output and prices.

Notes

Acknowledgements

This work has been supported by the research project BigDataFinance. BigDataFinance project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No. 675044.

References

  1. 1.
    Aiyar, S., Calomiris, C.W., Wieladek, T.: Does macro-prudential regulation leak? Evidence from a UK policy experiment. J. Money Credit Bank. 46(s1), 181–214 (2014)CrossRefGoogle Scholar
  2. 2.
    Allahrakha, M., Glasserman, P., Young, H.P., et al. (2015) Systemic importance indicators for 33 US bank holding companies: an overview of recent data. Office of Financial ResearchGoogle Scholar
  3. 3.
    Allen, F., Santomero, A.M.: What do financial intermediaries do? J. Bank. Finance 25(2), 271–294 (2001)CrossRefGoogle Scholar
  4. 4.
    Balasubramanyan, L., VanHoose, D.D.: Bank balance sheet dynamics under a regulatory liquidity-coverage-ratio constraint. J. Macroecon. 37, 53–67 (2013)CrossRefGoogle Scholar
  5. 5.
    Bardoscia, M., Battiston, S., Caccioli, F., Caldarelli, G.: DebtRank: a microscopic foundation for shock propagation. PloS one 10(6):e0130406 (2015)Google Scholar
  6. 6.
    Battiston, S., Puliga, M., Kaushik, R., Tasca, P., Caldarelli, G.: Debtrank: Too central to fail? Financial networks, the fed and systemic risk. Sci. Rep. 2(srep00), 541 (2012)CrossRefGoogle Scholar
  7. 7.
    Battiston, S., Caldarelli, G., D’Errico, M.: The financial system as a nexus of interconnected networks. In: Interconnected networks, pp 195–229. Springer, Cham (2016a)Google Scholar
  8. 8.
    Battiston, S., Caldarelli, G., D’Errico, M., Gurciullo, S.: Leveraging the network: a stress-test framework based on DebtRank. Stat. Risk Modeling 33(3–4), 117–138 (2016b)MathSciNetzbMATHGoogle Scholar
  9. 9.
    Battiston, S., D’Errico, M., Visentin, G.: Rethinking financial contagion (2016c). http://ssrn.com/abstract=2831143
  10. 10.
    Claessens, S., Ghosh, S.R., Mihet, R.: Macro-prudential policies to mitigate financial system vulnerabilities. J. Int. Money Finance 39, 153–185 (2013)CrossRefGoogle Scholar
  11. 11.
    D’Errico, M., Roukny, T.: Compressing over-the-counter markets (2017). https://ssrn.com/abstract=2962575
  12. 12.
    Eisenberg, L., Noe, T.H.: Systemic risk in financial systems. Manage. Sci. 47(2), 236–249 (2001)CrossRefzbMATHGoogle Scholar
  13. 13.
    Elsinger, H., Lehar, A., Summer, M.: Risk assessment for banking systems. Manage. Sci. 52(9), 1301–1314 (2006)CrossRefzbMATHGoogle Scholar
  14. 14.
    European Central Bank. Asset purchase programmes (2017a). http://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html
  15. 15.
    European Central Bank. ECB Statistical Data Warehouse (2017b). http://sdw.ecb.europa.eu/
  16. 16.
    European Central Bank. How quantitative easing works (2017c). https://www.ecb.europa.eu/explainers/show-me/html/app_infographic.en.html
  17. 17.
    European Commission (ESA2010) Institutional sectors (2017). http://ec.europa.eu/eurostat/web/sector-accounts/concepts/institutional-sectors
  18. 18.
    European Commission, Eurostat (2004) Harmonized Indices of Consumer Prices (HICPs), A Short Guide for Users (2004). http://ec.europa.eu/eurostat/documents/3859598/5884877/KS-BE-04-001-EN.PDF/0051a64b-490c-4fd7-8bf1-1dcae31f4970?version=1.0
  19. 19.
    Eurostat Gross domestic product, volumes (2017). http://ec.europa.eu/eurostat/en/web/products-datasets/-/TEINA011
  20. 20.
    Gambetti, L., Musso, A.: The macroeconomic impact of the ECB’s expanded asset purchase programme (APP). ECB Working Paper (2017)Google Scholar
  21. 21.
    Popoyan, L., Napoletano, M., Roventini, A.: Taming macroeconomic instability: monetary and macro-prudential policy interactions in an agent-based model. J. Econ. Behav. Organization 134, 117–140 (2017)CrossRefGoogle Scholar
  22. 22.
    Roukny, T., Bersini, H., Pirotte, H., Caldarelli, G., Battiston, S.: Default cascades in complex networks: topology and systemic risk. Sci. Rep. 3 (2013)Google Scholar
  23. 23.
    Roukny, T., Battiston, S., Stiglitz, J.E.: Interconnectedness as a source of uncertainty in systemic risk. J. Financial Stab. (2016)Google Scholar

Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.Department of Banking and FinanceUniversity of ZurichZurichSwitzerland

Personalised recommendations