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Quantitative Easing in the Euro Area: The Dynamics of Risk Exposures and the Impact on Asset Prices

Author

Listed:
  • R. S.J. Koijen
  • F. Koulischer
  • B. Nguyen
  • M. Yogo

Abstract

Using new data on security-level portfolio holdings by investor type and across countries in the euro area, we study portfolio rebalancing during the European Central Bank s (ECB) purchase programme that started in March 2015. To quantify changes in risk concentration, we estimate the evolution of the distribution of duration, sovereign, and corporate credit risk exposures across investor sectors and geographies. We find that 70% of ECB purchases are sold by the foreign sector and that risk mismatch, if anything, reduces. We use an instrumental variables estimator to show that the average impact on yields was -13bp. We connect the portfolio rebalancing and price effects by estimating a sector-level asset demand system for government debt.

Suggested Citation

  • R. S.J. Koijen & F. Koulischer & B. Nguyen & M. Yogo, 2016. "Quantitative Easing in the Euro Area: The Dynamics of Risk Exposures and the Impact on Asset Prices," Working papers 601, Banque de France.
    • Handle: RePEc:bfr:banfra:601
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    References listed on IDEAS

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    More about this item

    Keywords

    Quantitative Easing; Flow of Risk; Portfolio Rebalancing; Risk Concentration.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G2 - Financial Economics - - Financial Institutions and Services
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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