Impact of the PEPP: The repercussion on bond yields and bond liquidity
Abstract:
Since the covid-19 pandemic, the ECB has conducted different measures in order to counter its harmful economic effects. The most notorious one is the Pandemic Emergency Purchase Programme (PEPP). This paper aims at studying the impact of the PEPP announcement and its subsequent extension on the Eurozone corporate bond market. Using market data from Eikon and employing a difference-in-difference design, we find that the PEPP was successful in increasing prices and liquidity of eligible bonds. Nonetheless, in the medium term (after the second envelope extension) the impact of the programme on these bonds relative to the ineligible ones diminishes. Therefore, the results seem to indicate the existence of indirect effects, the idea of portfolio rebalancing mechanisms triggered by the PEPP release gives a possible explanation to these effects.
Fuente:
Biblioteca Virtual Banco de la República
Formatos de contenido:
Tesis
