Download This PaperInternational Capital Flows at the Security Level: Evidence from the ECB's Asset Purchase Programme
44 Pages Posted: 7 Apr 2020
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International Capital Flows at the Security Level - Evidence from the ECB's Asset Purchase Programme
Date Written: April, 2020
Abstract
We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase Programme at the security level. Based on net transactions of domestic and foreign securities, we observe euro area sectors' capital flows into individual securities, cleaned from valuation effects. Our empirical analysis – which accounts for security-level characteristics – shows that euro area investors (in particular investment funds and households) actively rebalanced away from securities targeted under the Public Sector Purchase Programme and other euro-denominated debt securities, towards foreign debt instruments, including ‘closest substitutes’, i.e. certain sovereign debt securities issued by non-euro area advanced countries. This rebalancing was particularly strong during the first six quarters of the programme. Our analysis also reveals marked differences across sectors as well as country groups within the euro area, suggesting that quantitative easing has induced heterogeneous portfolio shifts.
Keywords: capital flows, international investment patterns, investor heterogeneity, quantitative easing, sovereign debt
JEL Classification: F21, F42, E52, G15
Suggested Citation: Suggested Citation
Michael Fidora (Contact Author)
European Central Bank (ECB) ( email )
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Germany
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