Quantitative Easings Impact on Equity Prices in Europe

Abstract

This thesis explores how the use of quantitative easing in Europe impacts equity prices. The thesis uses a vector autoregression as a method to explore this relationship while also controlling for variables such as consumer price index, gross domestic national product and yield on long-term government bonds. Three post-estimation tests are then performed, Granger-Causality test, Impulse-Response Function and Forecast-Error Variance Decomposition. The findings suggest that while quantitative easing has been an effective policy to achieve productivity growth, it was only shown to have a positive significant impact on equity prices in two out of three observed areas.