Quantitative Easing in a fragmented Bond Market: core and periphery transmission channels

Antonio Marsi

Economics Bulletin, 2022, vol. 42, issue 3, 1474 - 1485

Abstract: We study how the Asset Purchase Program (APP) of the ECB affected core and periphery specific components of sovereign yields, using a novel proxy-SVAR specification. We identify a persistent increase in the convenience yield associated to safe German bonds in response to the identified APP shock. Through a decomposition exercise of the estimated impulse responses, we argue that this “convenience yield” effect has partially offset the expansionary effect produced by the reduction in the common component of long-term yields of the euro area. This result is achieved by estimating a flexible proxy-SVAR which permits to isolate different components of a single structural shock.

JEL-codes: E5 G1 (search for similar items in EconPapers)
Date: 2022-09-30
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