The transmission mechanism has been dominated by direct monetary measures since the
crisis of 2008. While the indirect impacts of the unconventional monetary instruments
have not been fully explored yet. Monetary policy and funding conditions determine
pricing sentiments for bond, stock and currency markets, represented by the volatilities
of their main indicators: stock market indices, exchange rates, and yield premia.
Our theoretical model takes spillover effects into account when it determines the
variables which are responsible for volatility: the activities of international financial
institutions (like the ESM or the IMF) are represented by dummy variables, while the
limited autonomy in the shadow of the ECB is captured through gravity-like approaches.
Six EU member states outside the Eurozone and Switzerland were analysed between 2007
and 2019 with random effect panel regression models to identify the differences in
the impact of spillover effects on capital market volatilities. The results obtained
are considered to be useful in mapping the potential effects of continuing monetary
easing in the near future
