The Liquidity of the Government Bond Market – What Impact Does Quantitative Easing Have? Evidence from Sweden

Marianna Blix Grimaldi (), Alberto Crosta () and Dong Zhang ()
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Marianna Blix Grimaldi: Swedish National Debt Office
Alberto Crosta: Swedish Financial Supervisory Authority

No 402, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We consider the effects of quantitative easing on the liquidity of the Swedish government bonds. To capture multiple dimensions of liquidity we use several measures built on a unique and highly granular transaction-based dataset. We find that the Riksbank’s purchases of government bonds improved liquidity, but only to a point. In fact, the deterioration in the level of market liquidity from quantitative easing via the scarcity effect is significantly larger than the improvement from the demand effect. We find that such effects are nonlinear; they tend to be amplified when the share of the central bank holdings is larger than a threshold (40 percent).

Keywords: Market Liquidity; Government Bond Market; Quantitative Easing; Public Debt Management (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2021-05-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0402

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