Quantitative easing in the Euro Area

Arbeitspapier

We examine the effects of the Asset Purchase Programme (APP) gradually introduced by the European Central Bank from September 2014 onwards. Studying the short-term reaction of financial markets after APP press releases, we analyse the development of bond yields and spreads around these releases. More precisely, we try to estimate different asset price channels by quantifying the cumulative decrease of spreads and by running event regressions for several Euro Area countries. Focusing on the signalling channel, measured by the OIS rate, and the portfolio rebalancing channel, proxied by the conditional bond-OIS spread, we find that the effects in yield and spread reduction were most pronounced for the announcement on the Public Sector Purchase Programme (PSPP) but declined afterwards for additional announcements. Possible explanations for this are the declining degree to which the ECB surprised markets and the increasingly burdensome institutional set-up of the APP. Moreover, our evidence suggests that portfolio rebalancing had a far larger impact on periphery than core countries' bonds, which supports argument made by Cúrdia and Woodford (2011).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2017-10

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy ; Monetary Policy ; Central Banks and Their Policies ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: Large Scale Asset Purchase ; Yield curve ; Quantitative Easing ; APP ; Event study

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Urbschat, Florian ; Watzka, Sebastian
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2017

Further information

• DOI: doi:10.5282/ubm/epub.37365
• Handle: http://hdl.handle.net/10419/162388
• URN: urn:nbn:de:bvb:19-epub-37365-7
• Last update: 10.03.2025, 11:43 AM CET