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Spillover effects of sovereign debt-based quantitative easing in the euro area

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  • Gnewuch, Matthias

Abstract

This paper proposes an identification strategy for news about sovereign debt-based asset purchases. It measures sovereign yield changes that are unrelated to movements in risk-free interest rates or risk premiums. Around ECB announcements, these reflect the anticipation of shifts in the effective supply of government debt, caused by central bank purchases. This paper documents that asset purchase news about government bonds have substantial spillovers to corporate bond and stock markets, within and beyond the euro area. Spillovers are unequal across euro-area countries, as stock prices rise most in low-risk countries with very large firms. In contrast, sovereign yields fall homogeneously.

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  • Gnewuch, Matthias, 2022. "Spillover effects of sovereign debt-based quantitative easing in the euro area," European Economic Review, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:eecrev:v:145:y:2022:i:c:s0014292122000654
    DOI: 10.1016/j.euroecorev.2022.104133
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    More about this item

    Keywords

    Quantitative easing; High-frequency identification; Euro area heterogeneity; ECB; PSPP; Bond scarcity;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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