The Stock and Flow Effects of Large-Scale Asset Purchases: Evidence from Persistent Versus Transitory Shocks

Nombulelo Gumata () and Eliphas Ndou
Additional contact information
Nombulelo Gumata: South African Reserve Bank

Chapter Chapter 20 in Achieving Price, Financial and Macro-Economic Stability in South Africa, 2021, pp 313-327 from Springer

Abstract: Abstract Are the stock effects of large-scale asset purchases more potent and persistent relative to the flow effects? We find that positive shocks to the level of South African Reserve Bank (SARB) assets lower yields on long-term government, the unemployment rate, Gini coefficient and the ratio of government interest cost to its expenditure. The channels of transmission are via the lower yields on government bonds, an increase in GDP growth, employment growth and asset price growth. The historical decompositions of large-scale asset purchases (LSAPs) shocks to ten-year yields for the period 2004M1 to 2008M12 when the SARB started accumulating forex reserves, thus growing the size of its balance sheet, show that the ten-year yields declined more and for a prolonged period. The result show that the ten-year yields declined more and for a prolonged period due to positive shocks to the level (stock) of the SARB sheet compared to flows (changes). Thus, the stock effects of LSAPs exert more persistent and potent effects compared to flows. These results mean that the size, duration and composition of LSAPs matter. It matters how a given stock of asset purchases is accumulated and composed. This is because such parameters of the asset purchase programme interact with the monetary policy stance to influence financial and macro-economic variables.

Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-66340-7_20

Ordering information: This item can be ordered from
http://www.springer.com/9783030663407

DOI: 10.1007/978-3-030-66340-7_20

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().