ECB Policies Involving Government Bond Purchases: Impact and Channels

Arvind Krishnamurthy, Stefan Nagel and Annette Vissing-Jorgensen

Research Papers from Stanford University, Graduate School of Business

Abstract: We evaluate the effects of three ECB policies (the Securities Markets Programme, the Outright Monetary Transactions, and the Long-Term Refinancing Operations) on government bond yields. We use a novel Kalman-filter augmented event-study approach and yields on euro-denominated sovereign bonds, dollar-denominated sovereign bonds, corporate bonds, and corporate CDS rates to understand the channels through which policies reduced sovereign bond yields. On average across Italy, Spain and Portugal, considering both the Securities Markets Programme and the Outright Monetary Transactions, yields fall considerably. Decomposing this fall, default risk accounts for 37%, redenomination risk accounts for 13%, and market segmentation effects accounts for 50%. In Italy, Spain and Portugal, the default risk premium and market segmentation channel were the dominant policy channels. The redenomination risk premium channel also contributed for Spain and Portugal, but not Italy. Stock price increases in distressed and core countries suggest that these policies also had beneficial macro-spillovers.

Date: 2017-09
New Economics Papers: this item is included in nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (67)

Downloads: (external link)
https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/441276
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: ECB Policies Involving Government Bond Purchases: Impact and Channels* (2018)
Working Paper: ECB Policies Involving Government Bond Purchases: Impacts and Channels (2017)
Working Paper: ECB Policies Involving Government Bond Purchases: Impact and Channels (2017)
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:ecl:stabus:repec:ecl:stabus:3578

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().