A High Frequency Assessment of the ECB Securities Markets Programme
27 Pages Posted: 15 Mar 2014
There are 3 versions of this paper
A High Frequency Assessment of the ECB Securities Markets Programme
A High Frequency Assessment of the ECB Securities Markets Programme
A High-Frequency Assessment of the ECB Securities Markets Programme
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: Suggested Citation
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