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Announcement and implementation effects of central bank asset purchases

Author

Listed:
  • Marco Bernardini

    (Bank of Italy)

  • Antonio M. Conti

    (Bank of Italy)

Abstract

What is the overall impact of announcement and implementation effects of asset purchases on financial conditions? Existing research lacks a unified approach for answering this question. We fill this gap by estimating a VAR model based on two pillars: a unique daily dataset covering ECB's asset purchases over the period 2014-2021 and a novel identification strategy combining survey-based external instruments and narrative sign restrictions. The findings underscore the relevance of both purchase announcements and actual purchases in influencing bond yields and stock prices. Neglecting how purchases are actually implemented may severely distort the assessment of their effectiveness.

Suggested Citation

  • Marco Bernardini & Antonio M. Conti, 2023. "Announcement and implementation effects of central bank asset purchases," Temi di discussione (Economic working papers) 1435, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1435_23
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2023/2023-1435/en_tema_1435.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary policy; asset purchases; stock effects; and flow effects; high-frequency; VAR.;
    All these keywords.

    JEL classification:

    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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