The Portfolio Rebalancing Effects of the ECB's Asset Purchase Programme

44 Pages Posted: 28 Jun 2017

See all articles by Giovanna Bua

Giovanna Bua

European Central Bank (ECB)

Peter G. Dunne

Central Bank of Ireland

Date Written: June 26, 2017


We explore the transmission of the ECB's public sector asset purchase programme (PSPP) via the portfolio rebalancing of investment funds and their investors. Evidence for this channel would validate several theoretical propositions and provide insights into market perceptions of intervention effects. Using dynamic panel methods, we find that PSPP-holding funds rebalance towards bonds issued by non-EA deposit taking corporations. Other bond and mixed funds also tend to rebalance towards non-EA issued NFC and government bonds. There is some evidence of rebalancing into longer-term maturities but none towards equities. These effects mainly become significant after the scaling-up of the programme. This pattern of rebalancing implies a heavy reliance on weakness of the euro to generate inflation and it reflects a continued reluctance to invest in the growth prospects of EA banks and corporates.

Keywords: Quantitative Easing, Unconventional Monetary Policy, Portfolio Rebalancing

JEL Classification: G15, G23, G28

Suggested Citation

Bua, Giovanna and Dunne, Peter G., The Portfolio Rebalancing Effects of the ECB's Asset Purchase Programme (June 26, 2017). Available at SSRN: or

Giovanna Bua

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Peter G. Dunne (Contact Author)

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics