Fiscal implications of the ECB's public sector purchase programme (PSPP)

Harmen Lehment

No 2107, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The large Public Sector Purchase Programme (PSPP) which the ECB started in 2015 on the basis of monetary policy purposes, had major side-effects on fiscal policy. One concerns the programme's uncommon seigniorage effects. We find that the PSPP not only led to partly negative seigniorage gains, but also produced super-seigniorage gains resulting from negative interest rates on the excess reserves which have been created by the programme. Another effect of the PSPP is its interference with fiscal debt management, thereby making fiscal budgets more vulnerable to changes in short-term interest rates. We also find that the experience with the PSPP suggests that fiscal policy should prepare for a greater role in fighting future recessions.

Keywords: central bank asset purchases; seigniorage gains; debt management; monetary-fiscal cooperation (search for similar items in EconPapers)
JEL-codes: E5 E6 H6 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2107

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