Milan Nedeljkovic – FEFA, Bulevar Zorana Đinđića 44, Belgrade, Serbia & CESifo Potschinger Strasse 5, Munich, Germany
Nikola Vasiljevic – University of Zurich, Plattenstrasse 14, Zurich, Switzerland


4th International Scientific Conference – EMAN 2020 – Economics and Management: How to Cope With Disrupted Times, Online/Virtual, September 3, 2020, SELECTED PAPERS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-31-8, ISSN 2683-4510


We examine how emerging market (EM) foreign exchange (FX) markets respond to innovations
in the monetary policy in advanced economies over the crisis period. We focus on the case of the
European Central Bank (ECB) which pursued a combination of different policies during the Eurozone
sovereign crisis. In a new econometric framework, we identify responses of foreign exchange markets
in three EM economies (Hungary, Poland and Turkey) to different types of ECB policies. We find weak
effect of the ECB’s Euro liquidity provisions on the EM foreign exchange markets. In contrast, while the
ECB’s foreign exchange liquidity provisions as well as government bond interventions and policy rate
changes did not impact the FX levels, they led to higher uncertainty in the FX markets. The results are
indicative of the additional, uncertainty channels through which monetary policy shocks in advanced
economies may affect the business cycle fluctuations in the EM economies.


Exchange rates, Monetary policy, Uncertainty, Conditional quantiles, MCMC.


Acharya, V. V., i S. Steffen (2015). “The Greatest Carry Trade Ever? Understanding Eurozone
Bank Risks”. Journal of Financial Economics, 115(2), 215- 236.
Acharya, V. V., D. Pierret, S. Steffen, (2018). “Lender of Last Resort versus Buyer of Last Resort.
Evidence from the European Sovereign Debt Crisis”. Discussion Paper 18-035, Swiss
Finance Institute.
Albagli, E., Ceballos, L., Claro, S., i D. Romero (2019). “Channels of US monetary policy spillovers
to international bond markets”. Journal of Financial Economics (forthcoming)
Binding, G. and Dibiasi, A., 2017. “Exchange rate uncertainty and firm investment plans evidence
from Swiss survey data”. Journal of Macroeconomics 51, 1–27.
Chen, M. J., Griffoli, M. T. M., R. Sahay, (2014). “Spillovers from United States monetary policy
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Drechsler, I., T. Drechsel, D. Marques-Ibanez, and P. Schnabl (2016): “Who Borrows from the
Lender of Last Resort?” The Journal of Finance, 71(5), 1933-1974.
Escanciano, J. C., C. Velasco (2010). “Specification Tests of Parametric Dynamic Conditional
Quantiles”. Journal of Econometrics, 159(1), 209-221.
Eser, F., and B. Schwaab (2016): “Evaluating the Impact of Unconventional Monetary Policy
Measures: Empirical evidence from the ECB’s Securities Markets Programme”. Journal
of Financial Economics, 119(1), 147-167.

Falagiarda, M., and S. Reitz (2015): “Announcements of ECB Unconventional Programs: Implications
for the Sovereign Spreads of Stressed Euro Area Countries”. Journal of International
Money and Finance, 53, 276-295.
Falagiarda, M., P. McQuade, M. Tirpak. (2015). “Spillovers from the ECB’s Non-standard Monetary
Policies on Non-euro area EU Countries: Evidence from an Event Study Analysis”.
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Assessing spillovers from euro area monetary policy”. Working Paper 248, Wien University
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Monetary Policy at the Zero Lower Bound: A Cross-country Analysis”. Journal of Money,
Credit and Banking, 46(4), 615-642.
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Financial Economics, 75(3), 691-734.
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as Lending-of-last-resort Does: Central Bank Liquidity Provision and Interbank Market
Functioning in the Euro Area”. Journal of Financial Intermediation, 28, 32-47.
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Lower Bound?”. Economic Journal, 122(564), 447-46.

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