The Conditional Path of Central Bank Asset Purchases

Christophe Blot, Caroline Bozou, Jerome Creel and Paul Hubert

Working papers from Banque de France

Abstract: We investigate the financial market effects of central bank asset purchases by exploiting the unique setting provided by ECB’s PSPP and PEPP policies. These programs consist in purchases of identical assets. The PSPP aimed to reduce deflationary risks, while the PEPP was announced to alleviate sovereign risks. We assess the effects of both policies on these two intermediate objectives. We find that the PSPP positively affects inflation swaps whereas the PEPP negatively impacts sovereign spreads. We explore the reasons for these differentiated effects. Making the rationale of a policy clear and credible influences its transmission to asset prices.

Keywords: Monetary Policy; Asset Prices; Central Bank Communication; Central Bank Reaction Function; Intermediate Objectives (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:885

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