Inspecting the Mechanism of Quantitative Easing in the Euro Area

Ralph Koijen, Francois Koulischer, Benoît Nguyen and Motohiro Yogo

No 13906, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using new data on security-level portfolio holdings by investor type and across countries in the euro area, we study portfolio rebalancing during the European Central Bank’s (ECB) purchase programme that started in March 2015. To quantify changes in risk concentration, we estimate the evolution of the distribution of duration, government, and corporate credit risk exposures across investor sectors and regions until the last quarter of 2017. Using these micro data, we show that 60% of ECB purchases are sold by non-euro area investors, and we do not find evidence that risks get concentrated in certain sectors or geographies. We estimate a sector-level asset demand system using instrumental variables to connect the dynamics of portfolio rebalancing to asset prices. Our estimates imply that government yields declined by 47bp, on average, but the estimates range from -28bp to -57bp across countries.

Date: 2019-08
New Economics Papers: this item is included in nep-cba
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Related works:
Journal Article: Inspecting the mechanism of quantitative easing in the euro area (2021)
Working Paper: Inspecting the Mechanism of Quantitative Easing in the Euro Area (2019)
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