The Effect of ECB's Quantitative Easing on Credit Default Swap Instruments in Central and Eastern Europe

This paper focuses on the quantitative easing policies launched by the European Central Bank (ECB), analysing their effects on the dynamics of a series of five-year sovereign credit default swap instruments that belong to seven Central and Eastern European States. In an econometric event study setup that follows the methodology developed in Albu et al. (2014), we calibrate an ARMA-GARCH model and analyse the abnormal and squared abnormal returns for each CDS instrument. The results indicate that the quantitative easing events issued by the European Central Bank have a significant effect on the evolution of the analysed sovereign credit default swap instruments.