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

50 Pages Posted: 9 Sep 2016  

Ralph S. J. Koijen

New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Francois Koulischer

Banque centrale du Luxembourg

Benoît Nguyen

Banque de France; Université Paris I Panthéon-Sorbonne

Motohiro Yogo

Princeton University - Department of Economics; National Bureau of Economic Research

Date Written: September 2016

Abstract

We use new data on security-level portfolio holdings of institutional investors and households in the euro area to understand the impact of the ongoing asset purchase programme of the European Central Bank (ECB) on the dynamics of risk exposures and on asset prices. We develop a tractable measurement framework to quantify the dynamics of euro-area duration, sovereign and corporate credit, and equity risk exposures as the programme evolves. We propose an instrumental-variables estimator to identify the impact of central bank purchases on sovereign bonds on sovereign bond yields. Our results suggest that the foreign sector sells most in response to the programme, followed by banks and mutual funds, while the purchases of insurance companies and pension funds are positively related to purchases by the ECB.

Keywords: Quantitative Easing, Flow of Risk, Portfolio Rebalancing, Risk Concentration

JEL Classification: E52, E58, G2, G15

Suggested Citation

Koijen, Ralph S. J. and Koulischer, Francois and Nguyen, Benoît and Yogo, Motohiro, Quantitative Easing in the Euro Area: The Dynamics of Risk Exposures and the Impact on Asset Prices. (September 2016). Available at SSRN: https://ssrn.com/abstract=2836353 or http://dx.doi.org/10.2139/ssrn.2836353

Ralph S. J. Koijen (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

HOME PAGE: http://www.koijen.net

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Francois Koulischer

Banque centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

HOME PAGE: http://https://sites.google.com/site/francoiskoulischer/

Benoît Nguyen

Banque de France ( email )

Paris
France

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Motohiro Yogo

Princeton University - Department of Economics ( email )

Julis Romo Rabinowitz Building
Princeton, NJ 08544
United States

HOME PAGE: http://sites.google.com/site/motohiroyogo/

National Bureau of Economic Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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