The ECB's Asset Purchase Programme: An Early Assessment

62 Pages Posted: 19 Sep 2016  

Philippe Andrade

Banque de France

Johannes H. Breckenfelder

European Central Bank (ECB) - Financial Research

Fiorella de Fiore

European Central Bank (ECB) - Directorate General Research

Peter Karadi

European Central Bank (ECB) - Directorate General Research

Oreste Tristani

European Central Bank (ECB)

Date Written: September 16, 2016

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.

Keywords: Unconventional Monetary Policy, Reanchoring Inflation Expectations, Transmission of Large-Scale Asset Purchases

JEL Classification: E44, E52, G12

Suggested Citation

Andrade, Philippe and Breckenfelder, Johannes H. and de Fiore, Fiorella and Karadi, Peter and Tristani, Oreste, The ECB's Asset Purchase Programme: An Early Assessment (September 16, 2016). ECB Working Paper No. 1956. Available at SSRN: https://ssrn.com/abstract=2839812

Philippe Andrade (Contact Author)

Banque de France ( email )

Paris
France

Johannes H. Breckenfelder

European Central Bank (ECB) - Financial Research ( email )

Sonnemannstrasse 20
D-60314 Frankfurt am Main
Germany

HOME PAGE: http://johannesbreckenfelder.eu/

Fiorella De Fiore

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6330 (Phone)
+49 69 1344 6575 (Fax)

Peter Karadi

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

HOME PAGE: http://sites.google.com/site/pkaradi696/

Oreste Tristani

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0049 69 1344 6000 (Fax)

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