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The financial market effects of the ECB's asset purchase programs

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  • Lewis, Vivien
  • Roth, Markus

Abstract

The European Central Bank's asset purchase programs, while intended to stabilize the economy, may have unintended side effects on financial stability. This paper aims at gauging the effects on financial markets, the banking sector, and lending to non-financial firms. Using a structural vector autoregression analysis, we find both in the euro area and in Germany a positive effect on output, while prices do not respond significantly. Asset purchases reduce financial stress, but this beneficial effect is overturned in the medium run. In Germany, implicit firm default rates rise, while loan write-offs by banks decrease. This could point to an avoidance of balance sheet repair in the financial sector.

Suggested Citation

  • Lewis, Vivien & Roth, Markus, 2017. "The financial market effects of the ECB's asset purchase programs," Discussion Papers 23/2017, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdps:232017
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    Cited by:

    1. Jef Boeckx & Maarten Dossche & Alessandro Galesi & Boris Hofmann & Gert Peersman, 2019. "Do SVARs with sign restrictions not identify unconventional monetary policy shocks?," Working Papers 1926, Banco de España;Working Papers Homepage.
    2. repec:zbw:svrwjg:201718 is not listed on IDEAS
    3. Paludkiewicz, Karol, 2018. "Unconventional Monetary Policy, Bank Lending, and Security Holdings: The Yield-Induced Portfolio Rebalancing Channel," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181669, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    asset purchase programs; balance sheet; monetary policy; central bank; shock identification; VAR;

    JEL classification:

    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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