The impact of corporate QE on liquidity: evidence from the UK

Lena Boneva, David Elliott, Iryna Kaminska, Oliver Linton, Nick McLaren and Ben Morley ()
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Ben Morley: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 782, Bank of England working papers from Bank of England

Abstract: Quantitative easing (QE) has become a key component of the monetary policy toolkit since the global financial crisis. However substantial uncertainty remains about the impact of QE on market liquidity. Identifying the impact is particularly challenging due to the potential for reverse causality, because liquidity considerations might affect purchases. To address this challenge, we study the Bank of England’s Corporate Bond Purchase Scheme (CBPS), in which the Bank of England purchased £10 billion of sterling corporate bonds via a series of auctions over 2016 and 2017. In particular, we use granular offer-level data from the CBPS auctions to construct proxy measures for the Bank of England’s demand for bonds and auction participants’ supply of bonds, allowing us to control for any reverse causality from liquidity to purchases. Across a wide range of transaction-based liquidity measures, we find that CBPS purchases improved the liquidity of purchased bonds.

Keywords: Quantitative easing; market liquidity; market-making; corporate bonds (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 G23 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2019-03-01, Revised 2020-07-23
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Impact of Corporate QE on Liquidity: Evidence from the UK (2022)
Working Paper: The Impact of Corporate QE on Liquidity: Evidence from the UK (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0782

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