Global financial cycle and eurozone’s financial stress: quantitative easing matters

This paper examines whether the expanded Quantitative Easing policies of the European Central Bank during the period 2015–2022 have influenced the impact of the Global Financial Cycle (GFC) on the Eurozone’s financial stress. The threshold regression reveals that these policies’ implementation has reduced the impact of GFC on financial stress in the post-2015 period, and thus contributed to lower systemic risk. The impulse responses of the quantile regression show that a global risk aversion shock does not have persistent effects on the financial stress distribution, and thus the GFC would not “set the tone” of the Eurozone’s financial conditions.