Macroeconomic Effects of an Open-ended Asset Purchase Programme

43 Pages Posted: 9 Jul 2019

Date Written: July 20, 2018


In this paper we evaluate the effectiveness of an open-ended Asset Purchase Programme (APP) for the euro area. To this purpose, we build on the large-scale New Keynesian dynamic general equilibrium model calibrated to the euro area and the rest of the world developed in Burlon et al. (2017), but, different from that contribution, we assume that the central bank does not announce the ending date of the programme, while leaving open the possibility of extending it in future periods conditionally on inflation developments. We assume that agents form their expectations about possible additional purchases beyond the horizon of the announcement by the central bank according to a rule linking them to the expected inflation gap. It is showed that the open-ended APP is more effective in immediately stimulating macroeconomic conditions than committing ex ante to an ending date. Importantly, the open-ended dimension provides a hedge against the materialization of negative euro-area aggregate demand shocks that pushes inflation away from its path towards the target. The effectiveness is further reinforced by a forward guidance on monetary policy rates.

Keywords: central bank communication, open-ended announcement, non-standard monetary policy, DSGE models, open-economy macroeconomics, euro area

JEL Classification: E43, E44, E52, E58

Suggested Citation

Burlon, Lorenzo and Notarpietro, Alessandro and Pisani, Massimiliano, Macroeconomic Effects of an Open-ended Asset Purchase Programme (July 20, 2018). Bank of Italy Temi di Discussione (Working Paper) No. 1185, July 2018, Available at SSRN: or

Lorenzo Burlon

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Alessandro Notarpietro (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Massimiliano Pisani

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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