Do Asset Purchase Programs Push Capital Abroad?

Thomas Klitgaard and David Lucca

No 20150812, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Euro area sovereign bond yields fell to record lows and the euro weakened after the European Central Bank (ECB) dramatically expanded its asset purchase program in early 2015. Some analysts predicted massive financial outflows spilling out of the euro area and affecting global markets as investors sought higher yields abroad. These arguments ignore balance of payments accounting, which requires any financial outflow from the euro area to be matched by a similar-sized inflow, absent a quick and substantial current account improvement. The focus on cross-border financial flows also is misguided since, according to asset pricing principles, the euro and global asset prices can move without any change in financial outflows.

Keywords: balance of payments; QE; ECB (search for similar items in EconPapers)
JEL-codes: E5 F00 G1 (search for similar items in EconPapers)
Date: 2015-08-12
New Economics Papers: this item is included in nep-mac
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