The Impact of Corporate QE on Liquidity: Evidence from the UK

Lena Boneva, David Elliott, Iryna Kaminska, Oliver Linton, Nick McLaren and Ben Morley

The Economic Journal, 2022, vol. 132, issue 648, 2615-2643

Abstract: There is substantial uncertainty about the impact of quantitative easing on market liquidity. Identifying the impact is particularly challenging due to the potential for reverse causality, because liquidity considerations might affect quantitative easing purchases. We address this challenge by studying the Bank of England’s 2016–7 Corporate Bond Purchase Scheme. In particular, we use granular offer-level data from the Corporate Bond Purchase Scheme auctions to construct proxy measures for the Bank of England's demand for bonds and auction participants’ supply of bonds, allowing us to control for any reverse causality from liquidity to purchases. We find that Corporate Bond Purchase Scheme purchases improved the liquidity of purchased bonds.

Date: 2022
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Related works:
Working Paper: The impact of corporate QE on liquidity: evidence from the UK (2020)
Working Paper: The Impact of Corporate QE on Liquidity: Evidence from the UK (2019)
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