Who Benefits from the Corporate QE? A Regression Discontinuity Design Approach

73 Pages Posted: 12 Feb 2017 Last revised: 10 Apr 2018

See all articles by Nordine Abidi

Nordine Abidi

International Monetary Fund ; European Central Bank (ECB) - Directorate General Economics

Ixart Miquel-Flores

European Central Bank (ECB); Frankfurt School of Finance & Mangement.

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2018

Abstract

On March 10, 2016, the European Central Bank (ECB) announced the Corporate Sector Purchase Programme (CSPP) - commonly known as corporate quantitative easing (QE) - to improve the financing conditions of the Eurozone's real economy and strengthen the pass-through of unconventional monetary interventions. Using a regression discontinuity design framework that exploits the rating wedge between the ECB and market participants, we show that: (i) bond yield spreads decline by around 15 basis points at the announcement of the programme, (ii) the impact is mostly noticeable in the sample of CSPP-eligible bonds that are perceived as high yield from the viewpoint of market participants and, (iii) the CSPP seems to have stimulated new issuance of corporate bonds. Overall, our results are consistent with the explanation that highlights the portfolio rebalancing mechanism and the liquidity channel.

Keywords: Unconventional Monetary Policy, Corporate Sector Purchase Programme (CSPP), Cost of Financing, Liquidity, Bond Issuance, Regression Discontinuity Design.

JEL Classification: E50, E52, E58, E59, G00, G11, G30, G32

Suggested Citation

Abidi, Nordine and Abidi, Nordine and Miquel-Flores, Ixart, Who Benefits from the Corporate QE? A Regression Discontinuity Design Approach (March 16, 2018). Available at SSRN: https://ssrn.com/abstract=2914911 or http://dx.doi.org/10.2139/ssrn.2914911

Nordine Abidi (Contact Author)

International Monetary Fund ( email )

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

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Ixart Miquel-Flores

European Central Bank (ECB) ( email )

Sonnemannstraße 20
Frankfurt am Main, 60325
Germany

Frankfurt School of Finance & Mangement. ( email )

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Frankfurt am Main, 60322
Germany

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