ECB Policies Involving Government Bond Purchases: Impacts and Channels

Stefan Nagel, Vissing-Jørgensen, Annette and Arvind Krishnamurthy
Authors registered in the RePEc Author Service: Annette Vissing-Jorgensen

No 12399, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We evaluate the effects of three ECB policies (the Securities Markets Programme, the Outright Monetary Transactions, and the Long-Term Refinancing Operations) on government bond yields. We use a novel Kalman-filter augmented event-study approach and yields on euro-denominated sovereign bonds, dollar-denominated sovereign bonds, corporate bonds, and corporate CDS rates to understand the channels through which policies reduced sovereign bond yields. On average across Italy, Spain and Portugal, considering both the Securities Markets Programme and the Outright Monetary Transactions, yields fall considerably. Decomposing this fall, default risk accounts for 37% of the reduction in yields, reduced redenomination risk for 13%, and reduced market segmentation effects for 50%. Stock price increases in distressed and core countries suggest that these policies also had beneficial macro-spillovers.

Date: 2017-10
New Economics Papers: this item is included in nep-eec and nep-mon
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Journal Article: ECB Policies Involving Government Bond Purchases: Impact and Channels* (2018)
Working Paper: ECB Policies Involving Government Bond Purchases: Impact and Channels (2017)
Working Paper: ECB Policies Involving Government Bond Purchases: Impact and Channels (2017)
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