Discussion paper

DP13906 Inspecting the Mechanism of Quantitative Easing in the Euro Area

Using new data on security-level portfolio holdings by investor type and across countries
in the euro area, we study portfolio rebalancing during the European Central Bank’s
(ECB) purchase programme that started in March 2015. To quantify changes in risk
concentration, we estimate the evolution of the distribution of duration, government,
and corporate credit risk exposures across investor sectors and regions until the last
quarter of 2017. Using these micro data, we show that 60% of ECB purchases are sold
by non-euro area investors, and we do not find evidence that risks get concentrated in
certain sectors or geographies. We estimate a sector-level asset demand system using
instrumental variables to connect the dynamics of portfolio rebalancing to asset prices.
Our estimates imply that government yields declined by 47bp, on average, but the
estimates range from -28bp to -57bp across countries.


Koijen, R, F Koulischer, B Nguyen and M Yogo (2019), ‘DP13906 Inspecting the Mechanism of Quantitative Easing in the Euro Area‘, CEPR Discussion Paper No. 13906. CEPR Press, Paris & London. https://cepr.org/publications/dp13906