Are all Central Bank Asset Purchases the Same? Different Rationales, Different Effects

Christophe Blot (1) , Caroline Bozou (1) , Jérôme Creel (1) , Paul Hubert (2, 3)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)
2 Observatoire Français des Conjonctures Economiques
3 Banque de France - Banque de France

Does policymakers’ rationale for a given policy influence the impact of this policy? To answer this question, we exploit the unique setting provided by ECB asset purchase programs. PSPP and PEPP policies consist in purchases of essentially identical assets, but their objectives differ. The PSPP aimed to reduce deflationary risks, while the PEPP was announced in response to the pandemic-driven economic crisis to alleviate sovereign risks. We assess the effects of both policies on both objectives. We find that the PSPP positively affects inflation swaps while the PEPP negatively impacts sovereign spreads but much less evidence of the opposite pattern.

Mots clés: Monetary policy; Asset prices; Central bank communication; Central bank reaction function; Intermediate objectives

Domaines: Économie et finance quantitative [q-fin]

Christophe Blot, Caroline Bozou, Jérôme Creel, Paul Hubert. Are all Central Bank Asset Purchases the Same? Different Rationales, Different Effects. 2021. ⟨hal-03554141⟩