US protectionist policies and its effects on Europe: Transmission channels and ECB's monetary policy response since 2016

Details

Supervisors

Rychalovska, Yuliya

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [60] en sciences économiques, orientation générale

Abstract

enIn recent years, the global environment has changed and we observe a return to protectionism, especially since Donald Trump took office. This thesis seeks to understand the effects of Trump’s protectionist measures on Europe and on the monetary policy choices of the ECB. To do so, our study uses both an event study based on daily data to understand the markets’ immediate reaction to trade-related announcements and a BVAR analysis using monthly data to examine the more persistent effects of trade uncertainty shocks. The results of our event study show that financial markets react immediately to trade-related announcements through higher market volatility while our BVAR analysis reveals a transmission mechanism over the medium term. Most interestingly, we observe an evolution in trade shocks. While pre-2016 shocks appear to act as supply shocks with limited effects, more recent shocks behave more like demand shocks.