The ECB's asset purchase programme: Theory, effects, and risks

Benigno, Pierpaolo; Canofari, Paolo; Bartolomeo, Giovanni Di; Messori, Marcello

doi:10.1111/joes.12521

Cited by 10 publications

(8 citation statements)

References 65 publications

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“…4. Two comprehensive and up-to-date surveys of the literature are Beckmann et al (2020) and Benigno et al (2023), whereas some noteworthy papers are Bluwstein and Canova (2016), Bulligan and Delle Monache (2018), Burriel and Galesi (2018), Cova and Ferrero (2015), Neri and Siviero (2018) and Zabala and Prats (2020).…”

Section: Discussionmentioning

confidence: 99%

“…The transmission channels of APPs have been described in Andrade et al (2016), Beckmann et al (2020), Benigno et al (2023), Bluwstein and Canova (2016), Cova and Ferrero (2015), Eser and Schwaab (2016), Joyce et al (2012) and Neri and Siviero (2018). Nevertheless, it is worth noting that all these authors stress the different aspects of the transmission channels by using slightly different taxonomies and terminologies.…”

Section: Literature Reviewmentioning

confidence: 99%

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An assessment of the impact of the PSPP on Spanish public bonds

Izquierdo-Cervera,

Sogorb-Mira

2023

SEF

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Purpose The purpose of this study is to analyse the impact of the European Central Bank’s (ECB) Public Sector Purchase Programme (PSPP) on Spanish sovereign debt. Design/methodology/approach The authors assess the impact of the PSPP on Spanish Government bonds from two different transmission channels (the signalling and the portfolio substitution) with two effects for each of them (the announcement and the expectation effects for the former and the stock and the rebalancing effects for the latter). The empirical study has been undertaken with event study methodology, controlled by macroeconomic variables, panel data and cross-sectional regression analyses. Findings The results show that both the ECB’s purchases under the PSPP and the announcements reduced Spanish Government bond yields. Compared to previous literature the Spanish Government bond yields reductions are larger than those for other countries. Research limitations/implications The authors’ approach to the impact of investors’ expectations is interesting, although they cannot draw evidence on this issue due to the lack of data. Practical implications From an economic perspective, the ECB can change economic agents’ expectations without actually carrying out any programme, only by announcing such a programme. Originality/value This paper contributes to the literature examining the PSPP from different transmission channels in Spain, taking into account the announcements, the expectations, the purchases and the variation in debt holdings relating to the PSPP from the beginning of the programme until 2020. Due to the large degree of heterogeneity across euro area countries, the results in this paper should improve our understanding of the relative differences in the impact of the PSPP and, thus, be of interest to academics and policymakers.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

An assessment of the impact of the PSPP on Spanish public bonds

Izquierdo-Cervera,

Sogorb-Mira

2023

SEF

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“…That is, there is a single …nal good produced by competitive …nal good …rms which use differentiated intermediate goods as inputs à la Dixit-Stiglitz. Then, each di¤erentiated intermediate good is produced by an intermediate good …rm that acts as a monopolist in its own product market facing Rotemberg-type nominal price …xities 12 and a …nancial constraint.…”

Section: Private …Rms and Productionmentioning

confidence: 99%

Can central banks do the unpleasant job that governments should do?

Dimakopoulou,

Economides,

Philippopoulos

et al. 2024

European Economic Review

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“…To (implicitly) support the sustainability of government debts, the ECB thus launched the Asset Purchase Programme (APP: March 2015) and combined an improved APP with a more effective form of T-LTRO (April 2016). Finally, it made the unexpected decision of re-opening a monthly APP in November 2019 to respond to the risk of a new stagnation (Benigno et al 2022b ).…”

Section: Pre-pandemic Financial and Fiscal Dominancementioning

confidence: 99%

“…9 Hence, since the beginning of the pandemic a strongly accommodative monetary policy has been fundamental to alleviate the fiscal burden in the weakest countries of the euro area. By keeping nominal interest rates close to zero or even negative, the ECB has lowered the financing cost of the growing government debts; and by purchasing the most significant part of these additional debts in the secondary segments of the financial markets, it has provided an implicit guarantee in terms of market access and lower risk premia even for the weakest countries (Benigno et al 2022b ).…”

Section: Financial and Fiscal Dominance During The Pandemicmentioning

confidence: 99%

The Spectre of Financial Dominance in the Eurozone

et al. 2023

Self Cite

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Differently from previous crises, the European institutions responded promptly to the Covid-19 pandemic by implementing an appropriate policy mix. However, this policy mix has proven to be insufficient for reducing the risks of financial instability in the European Union due to the temporary horizon of the centralised fiscal policy and the persistence of adverse shocks. In fact, the impact of the pandemic was exacerbated by the dramatic consequences of the war in Ukraine. The possible inefficiencies in implementing the Next Generation-EU (NG-EU) and an inadequate response to the Ukraine crisis could trigger, at best, the revival of financial and fiscal dominance in the euro-area economies. However, by using a simple model referred to the post-pandemic and war period, we show that the overburdening of the European Central Bank’s role would come with high costs. Hence, we argue that it is necessary to pursue sustainable development based on the successful implementation of the NG-EU and the related transformation of the one-shot centralised fiscal policy into a recurrent policy tool.

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The ECB's asset purchase programme: Theory, effects, and risks

Cited by 10 publications

References 65 publications

An assessment of the impact of the PSPP on Spanish public bonds

An assessment of the impact of the PSPP on Spanish public bonds

Can central banks do the unpleasant job that governments should do?

The Spectre of Financial Dominance in the Eurozone

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