Quantitative Easing in the Euro Area: The Dynamics of Risk Exposures and the Impact on Asset Prices

R. S.J. Koijen, Francois Koulischer, Benoît Nguyen and Motohiro Yogo

Abstract: Using new data on security-level portfolio holdings by investor type and across countries in the euro area, we study portfolio rebalancing during the European Central Bank’s (ECB) purchase programme that started in March 2015. To quantify changes in risk concentration, we estimate the evolution of the distribution of duration, sovereign, and corporate credit risk exposures across investor sectors and geographies. We find that 70% of ECB purchases are sold by the foreign sector and that risk mismatch, if anything, reduces. We use an instrumental variables estimator to show that the average impact on yields was -13bp. We connect the portfolio rebalancing and price effects by estimating a sector-level asset demand system for government debt.

Keywords: Quantitative Easing; Flow of Risk; Portfolio Rebalancing; Risk Concentration. (search for similar items in EconPapers)
JEL-codes: E52 E58 G15 G2 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:601

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