Konferenzbeitrag

Tracing the impact of the ECB's asset purchase programme on the yield curve

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We trace the impact of the European Central Bank (ECB) asset purchase programme (APP) on the yield curve. Exploiting granular information on sectoral asset holdings and ECB asset purchases, we construct a novel measure of the "free-float of duration risk" borne by pricesensitive investors. We include this supply variable in an arbitrage-free term structure model in which central bank purchases reduce the free-float of duration risk and hence compress term premia of yields. We estimate the stock of current and expected future APP holdings to reduce the 10y term premium by almost one percentage point. This reduction is persistent, with a half-life of five years. The expected length of the reinvestment period after APP net purchases has a significant impact on term premia.

Language: Englisch

Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2020: Gender Economics

Classification: Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
Asset Pricing; Trading Volume; Bond Interest Rates

Subject: Term structure of interest rates
term premia
central bank asset purchases
monetary policy
European Central Bank

Event: Geistige Schöpfung

(who): Eser, Fabian
Lemke, Wolfgang
Nyholm, Ken
Vladu, Andreea

Event: Veröffentlichung

(who): ZBW - Leibniz Information Centre for Economics

(where): Kiel, Hamburg

(when): 2020

Handle: http://hdl.handle.net/10419/224540

Last update: 10.03.2025, 11:42 AM CET

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Object type

Konferenzbeitrag

Associated

Eser, Fabian
Lemke, Wolfgang
Nyholm, Ken
Vladu, Andreea
ZBW - Leibniz Information Centre for Economics

Time of origin

2020

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