OC09012- Economics The European stock market impulse to the US financial crisis:

This study examines how the European stock market reacts to the U.S. financial crisis and the Fed’s policy, changing FFR. Johansen and Juselius cointegration analysis suggests that markets are integrated and there exists a long term relationship between these markets. The Granger causality test indicates that causality runs from US to European stock market. Implementing a Vector Error Correction Model (VECM), accounting for monetary and exchange rate policies, we measure the long-run elasticity of the European Stock Market not only to the Fed’s policy, but to the US market indices and the parity of the Euro-dollar exchange rate. The impulse response function and variance decomposition technique suggest that the US stock market indices play prominent role in explaining the European stock market volatility, compared with EU monetary and real variables, highlighting contagion among financial markets. Using both DJ and NASDAQ, our results suggest that the European Stock Market is more sensitive to NASDAQ