Impact of the European Central Bank Monetary Policy on the Financial Indicators of the Eastern European Countries
AbstractThe article presents the study results of the European Central Bank Monetary Policy influence on the Poland, Hungary, Czech Republic, and Slovak Republic financial indicators. By running vector autoregression models and applying Granger causality tests the study reveals the impact of the European Central Bank Monetary Policy on the yield of government bonds, interest rates and the inflow of foreign investments into the CEE countries. The results of the analysis demonstrate that the ECB monetary policy had an overall positive impact on the economies of Poland, Hungary and Czech Republic. In the context of a general decrease of interest rates under the influence of the ECB's unconventional monetary policy, these countries managed to achieve sustainable economic growth along with a decrease in the ratio of government debt to GDP and the ratio of interest payable on debt to GDP as well as stock indices growth. The opposite situation is observed in the euro area countries with a high debt burden, primarily in Greece and Italy. Although the ECB policy had led to the decrease of the interest payable on debt to GDP of the high debt euro area countries, the trend of the ratio of government debt to GDP growth for them (except Ireland) has an upward trend. In this situation, the ECB cannot significantly change the goals of its monetary policy, because any, even slight, increase in the discount rate will lead to a new euro area debt crisis with an epicenter in Italy and Greece. The situation may get worse after a probable sharp decline in the US stock market, caused by its current overheating
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