The Liquidity Effects of Official Bond Market Intervention
Michiel De Pooter,
Robert Martin () and
Seth Pruitt ()
No 1138, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)
To \"ensure depth and liquidity,\" the European Central Bank in 2010 and 2011 repeatedly intervened in sovereign debt markets through its Securities Markets Programme. These purchases provide a unique natural experiment for testing the effects of large-scale asset purchases on risk premia arising from liquidity concerns. To explore how official intervention influences liquidity premia, we develop a search-based asset-pricing model. Consistent with our model's predictions, we find statistically and economically significant stock and flow effects on sovereign bonds' liquidity premia in response to official purchases.
Keywords: Securities Markets Programme; European Central Bank; bond; liquidity risk; search and matching (search for similar items in EconPapers)
JEL-codes: D83 E43 E58 G12 (search for similar items in EconPapers)
Pages: 78 pages
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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http://www.federalreserve.gov/econresdata/ifdp/2015/files/ifdp1138.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/IFDP.2015.1138 http://dx.doi.org/10.17016/IFDP.2015.1138 (application/pdf)
Journal Article: The Liquidity Effects of Official Bond Market Intervention (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1138
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