Spillover effects and fractional co-movement dynamics between asset purchase programs of FED and ECB

Purpose The purpose of the paper is to explore long- and short-term relationships between the asset purchase programs (APPs) of the Federal Reserve bank (FED) and European Central Bank (ECB). Design/methodology/approach This study uses the Fractionally Cointegrated Vector Autoregressive model, Dynamic Spillover Connectedness Analysis and Wavelet Coherence Analysis to explore long- and short-term relationships between the APPs of the FED and ECB. Findings The findings reveal long memory and fractional cointegration between the programs, with the FED’s asset purchases serving as net transmitters to the ECB, particularly during the global financial crisis and COVID-19 crisis. Originality/value This study contributes to existing literature by investigating fractional cointegration and dynamic linkages in the APPs of the FED and the ECB.