Inspecting the Mechanism of Quantitative Easing in the Euro Area

46 Pages Posted: 9 Sep 2016 Last revised: 6 Mar 2021

See all articles by Ralph S. J. Koijen

Ralph S. J. Koijen

University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Francois Koulischer

University of Luxembourg

Benoît Nguyen

Banque de France

Motohiro Yogo

Princeton University - Department of Economics; National Bureau of Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: March 5, 2021

Abstract

Using security-level holdings for all euro-area investors, we study portfolio rebalancing during the quantitative easing program from March 2015 to December 2017. Foreign investors outside the euro area accommodated most of the Eurosystem’s purchases. Duration, government credit, and corporate credit risk did not get concentrated in particular regions or investor sectors. We estimate a demand system for government bonds by instrumental variables to relate portfolio rebalancing to yield changes. Government bond yields decreased by 65 basis points on average, and this estimate varies from 38 to 83 basis points across countries.

Keywords: Portfolio Rebalancing, Quantitative Easing, Risk Concentration, Unconventional monetary policy

JEL Classification: E52, G12, G15, G20

Suggested Citation

Koijen, Ralph S. J. and Koulischer, Francois and Nguyen, Benoît and Yogo, Motohiro, Inspecting the Mechanism of Quantitative Easing in the Euro Area (March 5, 2021). Journal of Financial Economics (JFE), Vol. 140, No. 1, 2021, University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-100, Banque de France Working Paper No. 601, Available at SSRN: https://ssrn.com/abstract=2836353 or http://dx.doi.org/10.2139/ssrn.2836353

Ralph S. J. Koijen (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/ralph.koijen/

Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Francois Koulischer

University of Luxembourg ( email )

Kirchberg, 6, rue Richard Coudenhove-Kalergi
Luxembourg
Luxembourg

Benoît Nguyen

Banque de France ( email )

Paris
France

Motohiro Yogo

Princeton University - Department of Economics ( email )

Julis Romo Rabinowitz Building
Princeton, NJ 08544
United States

HOME PAGE: http://sites.google.com/site/motohiroyogo/

National Bureau of Economic Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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