Scarcity effects of QE: A transaction-level analysis in the Bund market

Kathi Schlepper, Ryan Riordan, Heiko Hofer () and Andreas Schrimpf

No 06/2017, Discussion Papers from Deutsche Bundesbank

Abstract: This paper investigates the scarcity effects of quantitative easing (QE) policies, drawing on intra-day transaction-level data for German government bonds, purchased under the Public Sector Purchase Program (PSPP) of the ECB/Eurosystem. This paper is the first to match high-frequency QE purchase data with high-frequency inter-dealer data. We find economically significant price impacts at high (minute-by-minute) and low (daily) frequencies, highlighting the relevance of scarcity effects in bond markets. Asset purchase policies are not without side effects, though, as the induced scarcity has an adverse impact on liquidity conditions as measured by bid-ask spreads and inter-dealer order book depth. We further show that the price impact varies greatly with market conditions: it is considerably higher during episodes of illiquidity and when yields are higher.

Keywords: Quantitative Easing; European Central Bank; Scarcity Channel; Bond Market Liquidity; High-Frequency Data (search for similar items in EconPapers)
JEL-codes: E52 E63 G11 G12 H63 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/157253/1/884262146.pdf (application/pdf)

Related works:
Working Paper: Scarcity effects of QE: A transaction-level analysis in the Bund market (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:062017

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().