The ECB's Asset Purchase Programme: An Early Assessment

Abstract

Discussion papers are research-based papers on policy relevant topics. They are singled out from standard Working Papers in that they offer a broader and more balanced perspective. While being partly based on original research, they place the analysis in the wider context of the literature on the topic. They also consider explicitly the policy perspective, with a view to develop a number of key policy messages. Their format offers the advantage that alternative analyses and perspectives can be combined, including theoretical and empirical work.Discussion papers are written in a style that is more broadly accessible compared to standard Working Papers. They are light on formulas and regression tables, at least in the main text.The selection and distribution of discussion papers are subject to the approval of the Director General of the Directorate General Research.

Inspecting the mechanism of quantitative easing in the euro area

“…We estimate the average impact to be 65 basis points. This estimate is fairly close to 45 basis points for the ten-year government bond yield, based on an event study methodology (Andrade et al, 2016).…”

The impact of size, composition and duration of the central bank balance sheet on inflation expectations and market prices

“…According to their macro-finance BVAR model, this channel of the APP raised inflation by 0.3 percentage point in 2016 by reducing the maturity-weighted amount of government bonds outstanding in the market. Andrade et al (2016) show that the Eurosystem's APP has positive effects on inflation expectations, measured by survey data, attributing this effect to the portfolio rebalancing channel (but also to positive signalling effects of QE announcements). They also find evidence of the capital relief channel, through which banks' capital position benefits from higher prices of sovereign bonds induced by central bank asset purchases.…”

“…Other studies also find limited effects. Andrade et al (2016) estimate that the announcement of the ECB's asset purchase programme led to a 9 basis points increase of long-term inflation forecasts between 2015Q1 and 2015Q3. This is in line with Moessner (2015) and VP (2017) for the euro area and Guidolin and Neely (2010) for the US, who find that asset purchase programmes only led a slight increase in long-term inflation expectations.…”

A bank salvage model by impulse stochastic controls

“…Similar situations have been recently taken into consideration by a series the Central European Bank procedures, with particular reference to the well known quantitative easing, as well as in agreement to the creation of injected currency, see, e.g., [2,3,8,19]. We would like to underline that quantitative easing type procedures have been experienced also outside the European Union, as in the case of the actions undertaken by the Japanese Central Bank, whose intervention has lasted over years, see, e.g.…”

“…a central bank, can change the interest rate according to macroeconomic variables, as the country inflation level, the forecast of supranational interest rates, the the markets' belief about the health of the financial sector under the central bank control, etc. In fact, choosing α = 0 the bank value grows at rate µ(t), which is strictly greater than µ(t) − α(t) for a given control 0 < α(t) ≤ r. We refer to the above discussion, see also, e.g., [2,3,8,9,47,37,19], for more financially oriented ideas supporting the latter setting. Accordingly, we can assume that the controller aims at maximizing a functional of the following type…”