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

63 Pages Posted: 4 May 2018

See all articles by Nordine Abidi

Nordine Abidi

European Central Bank (ECB) - Directorate General Economics

Ixart Miquel-Flores

European Central Bank (ECB) - Economics - Monetary Policy; Frankfurt School of Finance & Mangement.

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 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 Quantitative Easing (QE), Cost of Financing, Liquidity, Bond Issuance, Regression Discontinuity Design

JEL Classification: E50, E52, G11, G30, G32

Suggested Citation

Abidi, Nordine and Miquel-Flores, Ixart, Who Benefits from the Corporate QE? A Regression Discontinuity Design Approach (April 18, 2018). ECB Working Paper No. 2145. Available at SSRN: https://ssrn.com/abstract=3165372

Nordine Abidi (Contact Author)

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

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Ixart Miquel-Flores

European Central Bank (ECB) - Economics - Monetary Policy ( email )

Sonnemannstraße 20
Frankfurt am Main, 60325
Germany

Frankfurt School of Finance & Mangement. ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

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