Credit Easing versus Quantitative Easing: Evidence From Corporate and Government Bond Purchase Programs

46 Pages Posted: 25 Sep 2019

See all articles by Stefania D'Amico

Stefania D'Amico

Federal Reserve Bank of Chicago

Iryna Kaminska

Bank of England

Date Written: September 20, 2019

Abstract

Using security-level data, we analyse the effects of the Bank of England’s multiple rounds of gilt purchases (aka Quantitative Easing, QE) and its Corporate Bond Purchase Scheme (aka Credit Easing, CE) on corporate bond prices and issuance. This allows direct estimation of (i) QE’s cross-asset supply effects and (ii) the joint supply effects of QE and CE. We show that in the case of QE alone, the pass-through of the gilt supply shock to corporate bond prices is significant, is larger in the longer-run than at announcement, and is often limited to the default-free component of the corporate yield. In the case of the joint conduct of QE and CE, we find that the CE is more effective than QE in reducing credit spreads, especially for higher-rated bonds, and in stimulating corporate bond issuance, which responds quite rapidly to the corporate bond supply shock.

Keywords: Quantitative Easing, Corporate Bond Purchase Scheme, Monetary Transmission Mechanism, Corporate Bonds

JEL Classification: E52, E58, E65, G12

Suggested Citation

D'Amico, Stefania and Kaminska, Iryna, Credit Easing versus Quantitative Easing: Evidence From Corporate and Government Bond Purchase Programs (September 20, 2019). Bank of England Working Paper No. 825, September 2019, Available at SSRN: https://ssrn.com/abstract=3459013 or http://dx.doi.org/10.2139/ssrn.3459013

Stefania D'Amico

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Iryna Kaminska (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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