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The ECB's asset purchase programme: an early assessment

Author

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  • Breckenfelder, Johannes
  • De Fiore, Fiorella
  • Andrade, Philippe
  • Karadi, Peter
  • Tristani, Oreste

Abstract

This paper analyses the effects of the European Central Bank's expanded asset purchase programme (APP) on yields and on the macroeconomy, and sheds some light on its transmission channels. It shows, first, that the January 2015 announcement of the programme has significantly and persistently reduced sovereign yields on long-term bonds and raised the share prices of banks that held more sovereign bonds in their portfolios. This evidence is consistent with versions of the portfolio rebalancing channel acting through the removal of duration risk and the relaxation of leverage constraints for financial intermediaries. It then presents a stylised macroeconomic model that incorporates the aforementioned transmission channels. The model suggests that the macroeconomic impact of the programme can be expected to be sizable. JEL Classification: E44, E52, G12

Suggested Citation

  • Breckenfelder, Johannes & De Fiore, Fiorella & Andrade, Philippe & Karadi, Peter & Tristani, Oreste, 2016. "The ECB's asset purchase programme: an early assessment," Working Paper Series 1956, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20161956
    Note: 1125999
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1956.en.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    reanchoring inflation expectations; transmission of large-scale asset purchases; unconventional monetary policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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