Evaluating central bank asset purchases in a term structure model with a forward-looking supply factor

  1. Juan Equiza 1
  2. Ricardo Gimeno 2
  3. Antonio Moreno 1
  4. Carlos Thomas 2
  1. 1 Universidad de Navarra
    info

    Universidad de Navarra

    Pamplona, España

    ROR https://ror.org/02rxc7m23

  2. 2 Banco de España
    info

    Banco de España

    Madrid, España

    ROR https://ror.org/02f26yq04

Zeitschrift:
Documentos de trabajo - Banco de España

ISSN: 0213-2710

Datum der Publikation: 2023

Nummer: 3

Art: Arbeitsdokument

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Andere Publikationen in: Documentos de trabajo - Banco de España

Zusammenfassung

The theoretical literature on term structure models emphasises the importance of the expected absorption of duration risk during the residual life of term bonds in order to understand the yield curve effect of central banks’ government bond purchases. Motivated by this, we develop a forward-looking, long-horizon measure of euro area government bond supply net of Eurosystem holdings, and use it to estimate the impact of the ECB’s asset purchase programmes in the context of a no-arbitrage affine term structure model. We find that an asset purchase shock equivalent to 10% of euro area GDP lowers the 10-year average yield of the euro area big four by 59 basis points (bp) and the associated term premium by 50 bp. Applying the model to the risk-free (OIS) yield curve, the same shock lowers the 10-year rate and term premium by 35 and 26 bp, respectively.

Fuente de los datos: Dialnet