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Inspecting the mechanism of quantitative easing in the euro area

Ralph S.J. Koijen, Francois Koulischer (), Benoît Nguyen and Motohiro Yogo

Journal of Financial Economics, 2021, vol. 140, issue 1, 1-20

Abstract: Using security-level holdings for all euro-area investors, we study portfolio rebalancing during the quantitative easing program from March 2015 to December 2017. Foreign investors outside the euro area accommodated most of the Eurosystem’s purchases. Duration, government credit, and corporate credit risk did not get concentrated in particular regions or investor sectors. We estimate a demand system for government bonds by instrumental variables to relate portfolio rebalancing to yield changes. Government bond yields decreased by 65 basis points on average, and this estimate varies from 38 to 83 basis points across countries.

Keywords: Portfolio rebalancing; Quantitative easing; Risk concentration; Unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: E52 G12 G15 G20 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Inspecting the Mechanism of Quantitative Easing in the Euro Area (2019) Downloads
Working Paper: Inspecting the Mechanism of Quantitative Easing in the Euro Area (2019) Downloads
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DOI: 10.1016/j.jfineco.2020.11.006

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