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Impact of the Asset Purchase Programme on euro area government bond yields using market news

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  • De Santis, Roberto A.

Abstract

Assessing the impact on sovereign yields of the euro area Asset Purchase Programme (APP) is challenging, because the monetary policy announcement in January 2015 was already implicitly communicated to the market in the second half of 2014. To identify the APP effect, we construct an index which computes the intensity of this discussion in Bloomberg. The econometric results, which are based on real time vintages, suggest that the so-called stock effect with purchases worth about 10% of GDP reduced the GDP-weighted 10-year euro area sovereign yield by 72 basis points, which is equivalent to effects estimated for US and UK programmes, and much larger than those suggested by event studies for the euro area.

Suggested Citation

  • De Santis, Roberto A., 2020. "Impact of the Asset Purchase Programme on euro area government bond yields using market news," Economic Modelling, Elsevier, vol. 86(C), pages 192-209.
    • Handle: RePEc:eee:ecmode:v:86:y:2020:i:c:p:192-209
    DOI: 10.1016/j.econmod.2019.06.011
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    More about this item

    Keywords

    Quantitative easing; APP; Sovereign yields; Euro area;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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