Driven by the Markets? ECB Sovereign Bond Purchases and the Securities Markets Programme

Ansgar Belke

No 194, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: After the dramatic rescue package for the euro area, the governing council of the European Central Bank decided to purchase European government bonds - to ensure an 'orderly monetary policy transmission mechanism'. Many observers argued that, by bond purchases, national fiscal policies could from now on dominate the common monetary policy. This note argues that they are quite right. The ECB has indeed become more dependent in political and financial terms. The ECB has decided to sterilise its bond purchases - compensating those purchases through sales of other bonds or money market instruments to keep the overall money supply unaffected. This is to counter accusations that the ECB is monetizing government debt. This note addresses how effective these sterilisation policies are.

Keywords: accountability; bail-out; bond purchases; central bank independence; insolvency risk; Securities Markets Programme; transparency (search for similar items in EconPapers)
JEL-codes: E42 E51 E58 E63 G32 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Driven by the markets? ECB sovereign bond purchases and the securities markets programme (2010)
Working Paper: Driven by the Markets?: ECB Sovereign Bond Purchases and the Securities Markets Programme (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:194

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