Working Paper: NBER ID: w26152
Authors: Ralph S. J. Koijen; Francois Koulischer; Benoit Nguyen; Motohiro Yogo
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: Quantitative Easing; Portfolio Rebalancing; Euro Area; Government Bonds
JEL Codes: E52; F21; G11; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| demand elasticity of foreign investors (F31) | yield impact of QE (E43) |
| foreign investors' demand elasticities (F31) | rebalancing behavior (D91) |
| QE program (C54) | risks associated with financial stability (F65) |
| QE program (C54) | government bond yields (E43) |
| 10% purchase of government debt outstanding (H63) | yield (Y60) |
| QE program (C54) | total valuation effect on portfolios (G11) |