A High Frequency Assessment of the ECB Securities Markets Programme

27 Pages Posted: 15 Mar 2014

See all articles by Eric Ghysels

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Julien Idier

Banque de France - Centre de Recherche; European Central Bank (ECB)

Simone Manganelli

European Central Bank (ECB)

Olivier Vergote

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: February 10, 2014

Abstract

Policy impact studies often suffer from endogeneity problems. Consider the case of the ECB Securities Markets Programme: If Eurosystem interventions were triggered by sudden and strong price deteriorations, looking at daily price changes may bias downwards the correlation between yields and the amounts of bonds purchased. Simple regression of daily changes in yields on quantities often give insignificant or even positive coefficients and therefore suggest that SMP interventions have been ineffective, or worse counterproductive. We use high frequency data on purchases of the ECB Securities Markets Programme and sovereign bond quotes to address the endogeneity issues. We propose an econometric model that considers, simultaneously, first and second conditional moments of market price returns at daily and intradaily frequency. We find that SMP interventions succeeded in reducing yields and volatility of government bond segments of the countries under the programme. Finally, the new econometric model is broadly applicable to market intervention studies.

Keywords: unconventional monetary policy; euro area crisis; SMP; component models; high frequency data

JEL Classification: E52, E44, G12, C58

Suggested Citation

Ghysels, Eric and Idier, Julien and Manganelli, Simone and Vergote, Olivier, A High Frequency Assessment of the ECB Securities Markets Programme (February 10, 2014). ECB Working Paper No. 1642, Available at SSRN: https://ssrn.com/abstract=2393376 or http://dx.doi.org/10.2139/ssrn.2393376

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://https://eghysels.web.unc.edu/

Julien Idier

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Simone Manganelli

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Frankfurt am Main, 60311
Germany

HOME PAGE: http://www.simonemanganelli.org

Olivier Vergote

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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