Work

The Liquidity Effects of Official Bond Market Intervention

Year: 2015

Type: article

Abstract: To "ensure depth and liquidity," the European Central Bank in 2010 and 2011 repeatedly intervened in sovereign debt markets through its Securities Markets Programme. These purchases provide a unique natural experiment for testing the effects of large-scale asset purchases on risk premia arising from liquidity concerns. To explore how official intervention influences liquidity premia, we develop a search-based asset-pricing model. Consistent with our model's predictions, we find statistically and economically significant stock and ow effects on sovereign bonds' liquidity premia in response to official purchases.

Source: International Finance Discussion Paper

DOI: 10.17016/ifdp.2015.1138

Authors: Michiel De Pooter, Robert F. Martin, Seth Pruitt

Institutions: Federal Reserve, Federal Reserve Board of Governors, Arizona State University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

OpenAlex ID: W1827249776

FWCI: 5.744

Cites: 30

Cited by: 24

Related to: 10