Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261174 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2640
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We identify a novel dimension of monetary policy from high-frequency changes in asset prices around ECB policy events, orthogonal to surprises extracted from risk-free interest rates. We find that it is present in policy events that were interpreted by real-time market commentaries as containing information about asset purchase programmes aimed to stabilise financial markets and safeguard the monetary policy transmission by implementing asset purchases in a exible manner across asset classes and euro area countries. We label this dimension of policy "market-stabilization QE" to contrast it with conventional QE programmes such as the APP launched by the ECB in 2015 aimed to extract duration risk. When including our market-stabilization QE, the R2 for the regression of sovereign yields during the sovereign debt crisis increases by about 50 percentage points and the one of the stock market by 35 percentage points; during the COVID-19 pandemic by 25 and 15 percentage points, respectively. Although it moves euro area stressed-country sovereign yields down and German sovereign yields up as a result of the reversal of ight-to-safety dynamics, it generates strong expansionary macroeconomic effects in all euro area countries including Germany.
Subjects: 
Central Bank Communication
Monetary Policy Shocks
European Debt Crisis
COVID-19 Pandemic
Unconventional Monetary Policies
JEL: 
E43
E44
E52
E58
E65
G01
G14
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4973-6
Document Type: 
Working Paper

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