EconPapers    
Economics at your fingertips  
 

Quantitative easing and preferred habitat investors in the euro area bond market

Martijn Boermans and Robert Vermeulen

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: Quantitative easing (QE) aims to lower long term interest rates and stimulate economic growth via the portfolio rebalancing channel. One of the assumptions for QE to work is that there are investors with strong preferences to hold long term bonds, i.e. so called preferred habitat investors. This paper investigates whether the ECB's Public Sector Purchase Programme (PSPP) affected euro area investors' demand for bonds using granular securities holdings data. The results show strong evidence that euro area investors acted as preferred habitat investors. These findings hold across all major euro area investors (banks, insurance companies, pension funds and investment funds). The results suggest that since the sellers of bonds in response to QE in the euro area are different from those that sold to the Fed, BoE and BoJ, policymakers need to pay particular attention to demand by non-euro area investors, especially if the ECB plans to reduce its balance sheet.

Keywords: quantitative easing; sovereign bonds; European Central Bank; PSPP; securities holdings statistics (search for similar items in EconPapers)
JEL-codes: E58 F42 G11 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2018-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.dnb.nl/en/binaries/Working%20Paper%20No.%20586_tcm47-373305.pdf

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:dnb:dnbwpp:586

Access Statistics for this paper

More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().

 
Page updated 2019-02-09
Handle: RePEc:dnb:dnbwpp:586