Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175676 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2052
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We estimate the response of euro area sovereign bond yields to purchase operations under the ECB's Public Sector Purchase Programme (PSPP), using granular data on all PSPP-eligible securities at daily frequency. To avoid simultaneity bias in the estimated relationship between yields and purchase volumes, we exploit a PSPP design feature that renders certain securities temporarily ineligible for reasons unrelated to their yields. Using these temporary purchase restrictions as an instrument to identify exogenous variation in purchase volumes, we find that the "flow effect" of PSPP operations has, on average, led to a temporary 7 basis-point decline in sovereign bond yields on the day of purchase. This impact estimate is well above those found in similar studies for the US; at the same time, our results imply that flow effects have accounted for only a limited share of the downward pressure of PSPP on sovereign yields, most of which instead derived from anticipation and announcement effects at the onset of the programme.
Subjects: 
Quantitative Easing
Monetary Policy
Sovereign Yields
Natural Experiment
JEL: 
E52
E58
E65
G12
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2774-1
Document Type: 
Working Paper

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