 Causal analysis of central bank holdings of corporate bonds under interferenceTaneli Mäkinen (), Fan Li, Andrea Mercatanti () and Andrea Silvestrini Economic Modelling, 2022, vol. 113, issue C Abstract: We investigate whether the transfer of corporate bonds from the private sector to the balance sheet of the central bank permanently alters their relative prices. Answering this question complements the literature on central bank asset purchase programs, documenting significant relative price changes over shorter horizons. We use data on bonds issued over the duration of the European Central Bank's corporate bond purchase program and a novel regression discontinuity design to quantify the causal effect of interest. The estimates indicate that the program did not, on average, permanently alter the yield spreads of eligible bonds relative to those of similar noneligible bonds. This finding suggests that central bank holdings of even relatively illiquid private sector securities can have no distortionary effects on the relative prices of such assets. Keywords: Asset purchase programs; Causal inference; Interference; Regression discontinuity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:113:y:2022:i:c:s0264999322001195 DOI: 10.1016/j.econmod.2022.105873 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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