The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries
Round 1
Reviewer 1 Report
I suggest that the authors change the title of the paper, removing the expression "sustainable financial development" and changing the title to "The impact of monetary policies on sustainable economic and financial development in the Euro Area Countries."
Author Response
Responses to the reviewer 1
Author Response File: 
Author Response.docx
Reviewer 2 Report
The authors of the research paper “Sustainable Financial Development – the Impact of Monetary Policies on the Economic Growth in the Euro Area Countries ” presented a topic very relevant to financial systems and monetary policies. There is a lack of explanation about TLTRO mechanism as monetary policy instrument.
The authors say that .."Since the central bank affects only the determination of short-term returns and long-term yields from securities holdings are determined on the basis of demand and supply on the stock market, we need to divide them up" this requires a much more detailed explanation.
The authors say that How can the Asset Purchase Programme help the ECB to fulfil its mandate to sustain the financial stability? Can this Programme help the ECB to support faster or sustainable growth and job creation in the Europe. I think author should pay attention to the fact that ECB is not in charge to sustain the financial stability but in charge of supervising that finacial stability.
They also refer to "The EURIBOR spread variable (Euribor), resp. the difference between the three-month EURIBOR and the Overnight Interest Rate Swaps is..." but no references to €sther which is a very important reference rate for the currency euro and also calculated by the European Central Bank (ECB) and is based on the money market statistical reporting of the Eurosystem. This surprises to me.
It is not clear enough for me the main goal of the paper and the introduction does not fix quite well with the main goal. I think the introduction should be rewritten to be more precise.
Finally, the conclusions are relevant but I suggest to the authors to focus on previous items pointed out and rewritten these conclusions again including further research.
Author Response
Responses to the reviewer 2
Author Response File: 
Author Response.pdf
Round 2
Reviewer 2 Report
The authors of the research paper “The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries” presented a topic very relevant to financial systems and banking institutions. I can see how the majority of my concerns and recommendations have been followed by the authors.
However, I miss a brief reflection about another important factor in monetary policies which is the interaction between bank and sovereign default risk. Let me suggest some very recently references on this topic.: Lovreta, L., López Pascual, J. “Structural breaks in the interaction between bank and sovereign default risk”. SERIEs (2020). https://doi.org/10.1007/s13209-020-00219-z. that could be included on your paper also as a reference.
Finally, I do suggest to rewrite this final lines (509-512) because is not easy to understand “In conclusion, we determined the impact of QE (in the form of APP) through the expected changes in predictors (based on the analyses above). We have aggregated the percentage change from each model to the expected weighted average change, with the models being weighted based on the AIC”.
Also some moderate English changes required
Author Response
Cover letter to Reviewer 2 new 2
Point 1. However, I miss a brief reflection about another important factor in monetary policies which is the interaction between bank and sovereign default risk. Let me suggest some very recently references on this topic: Lovreta, L., López Pascual, J. “Structural breaks in the interaction between bank and sovereign default risk”. SERIEs (2020). https://doi.org/10.1007/s13209-020-00219-z. that could be included on your paper also as a reference.
Point 2. Finally, I do suggest to rewrite this final lines (509-512) because is not easy to understand “In conclusion, we determined the impact of QE (in the form of APP) through the expected changes in predictors (based on the analyses above). We have aggregated the percentage change from each model to the expected weighted average change, with the models being weighted based on the AIC”.
Also some moderate English changes required.
Response 1.
New paragraph in the section 5. Discussion – at the end
Other important instrument of monetary policies discussed in broader context includes global risk regulation and the factor of the interaction between bank and sovereign default risk. Authors (44) analysed the pattern of interaction between bank and sovereign default risk by endogenously estimating the timing of structural breaks in Spain during the recent crisis period and post-crisis period 2008-2012. They found out that structural dependence in the system extends to the interaction between bank and sovereign default risk volatility. Many exogenously proposed breaks are of particular importance to one specific economic system, which can help policy makers and experts to structure their actions.
New reference 44. – was supplemented
Lovreta, L., López Pascual, J. Structural breaks in the interaction between bank and sovereign default risk. SERIEs (2020). https://doi.org/10.1007/s13209-020-00219-z
Response 2.
Akaike Information Criterion (AIC) is a fined technique based on in-sample fit to estimate the likelihood of a model to predict/estimate the future values. A good model is the one that has minimum AIC among all the other models.
The weights of the given models were designed on the basic of AIC - Akaike Information Criterion. The use of AIC was by an aggregation of four 2SLS models (the specification is in Table A3 in Appendix A). Aggregation of estimates was based on this weighted average basis (AIC). We compiled/designed the weighted average as follows:
If the first model had AIC1,, so the weight of this model was:
w1 = AIC1/(AIC1+AIC2+AIC3+AIC4).
If we marked the point estimate of GDP obtained from the first model as GDP1_hat, then we designed the estimate as: GDP_hat =w1 * GDP1_hat + w2 * GDP2_hat + w3 * GDP3_hat + w4 * GDP4_hat
The AIC values are given at the end of the Table A3.
Response 2. in the text, section 4. Results, 4.3., the last paragraph revised
In conclusion, we determined the impact of QE (in the form of APP) through the expected changes in predictors (based on the analyses above). We have aggregated the percentage change from each model to the expected weighted average basis change. The weights of the given models were designed on the basic of AIC - Akaike Information Criterion. The use of AIC was by an aggregation of four 2SLS models (the specification is in Table A3 in Appendix A), it means aggregation of estimates was based on this weighted average basis (AIC). The AIC values are given at the end of the Table A3.
Author Response File: Author Response.docx
