Central bank bond purchases in emerging market economies

Yavuz Arslan, Mathias Drehmann and Boris Hofmann

No 20, BIS Bulletins from Bank for International Settlements

Abstract: In response to the Covid-19 shock, many central banks in emerging market economies have launched local currency bond purchase programmes to address bond market dislocations, signalling that they were willing to take the role of a buyer of last resort. Local currency bond yields fell significantly following the programme announcements, with little effect on exchange rates. These positive initial market reactions suggest that the programmes were successful in restoring investor confidence and did not lead to higher inflation expectations, eg due to perceived risks of fiscal dominance. Market reactions varied between countries, depending on initial conditions in each jurisdiction as well as on the scope, scale and communication of the bond purchase programmes.

Pages: 9 pages
Date: 2020-06-02
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (44)

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