Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/224540
Authors: 
Eser, Fabian
Lemke, Wolfgang
Nyholm, Ken
Vladu, Andreea
Year of Publication: 
2020
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2020: Gender Economics
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
We trace the impact of the European Central Bank (ECB) asset purchase programme (APP) on the yield curve. Exploiting granular information on sectoral asset holdings and ECB asset purchases, we construct a novel measure of the "free-float of duration risk" borne by pricesensitive investors. We include this supply variable in an arbitrage-free term structure model in which central bank purchases reduce the free-float of duration risk and hence compress term premia of yields. We estimate the stock of current and expected future APP holdings to reduce the 10y term premium by almost one percentage point. This reduction is persistent, with a half-life of five years. The expected length of the reinvestment period after APP net purchases has a significant impact on term premia.
Subjects: 
Term structure of interest rates
term premia
central bank asset purchases
monetary policy
European Central Bank
JEL: 
C5
E43
E52
E58
G12
Document Type: 
Conference Paper

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