Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154075
Authors: 
Ghysels, Eric
Idier, Julien
Manganelli, Simone
Vergote, Olivier
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1642
Abstract: 
Policy impact studies often suffer from endogeneity problems. Consider the case of the ECB Securities Markets Programme: If Eurosystem interventions were triggered by sudden and strong price deteriorations, looking at daily price changes may bias downwards the correlation between yields and the amounts of bonds purchased. Simple regression of daily changes in yields on quantities often give insignificant or even positive coefficients and therefore suggest that SMP interventions have been ineffective, or worse counterproductive. We use high frequency data on purchases of the ECB Securities Markets Programme and sovereign bond quotes to address the endogeneity issues. We propose an econometric model that considers, simultaneously, first and second conditional moments of market price returns at daily and intradaily frequency. We find that SMP interventions succeeded in reducing yields and volatility of government bond segments of the countries under the programme. Finally, the new econometric model is broadly applicable to market intervention studies.
Subjects: 
component models
euro area crisis
high frequency data
SMP
unconventional monetary policy
JEL: 
E52
E44
G12
C58
Document Type: 
Working Paper

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