## Asset Purchase Programs in European Emerging Markets

_Departmental Papers, September 24, 2021_

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**Canonical URL:** [Asset Purchase Programs in European Emerging Markets](https://www.imf.org/en/publications/departmental-papers-policy-papers/issues/2021/09/23/asset-purchase-programs-in-european-emerging-markets-464648)

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## Bibliographic details
- Authors: Marco Arena, Rudolfs Bems, Nadeem Ilahi, Jaewoo Lee, William Lindquist, Tonny Lybek
- Published: September 24, 2021
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9781513593753.087

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### Summary and Purpose
- Several emerging market central banks in Europe deployed asset purchase programs (APPs) amid the 2020 pandemic.
- The common main goals were to address market dysfunction and impaired monetary transmission, distinct from the quantitative easing conducted by major advanced economy central banks.
- APPs in this context focused on alleviating market dysfunction rather than the traditional emerging market concern of destabilizing the exchange rate or inflation expectations.

### Key Findings and Evidence
- Evidence uncovered indicates APPs in European emerging markets:
  - Stabilized government bond markets.
  - Boosted equity prices.
  - Showed no indication of exchange rate pressure.
- Likely reflecting the global nature of the crisis, these APPs defied traditional emerging market concerns and instead alleviated markets successfully.

### Constraints, Usability, and Scalability
- Global and domestic factors that could limit the usability of APPs were examined.
- In the event of renewed market dysfunction, there is a potential scope for scaling up APPs in most European emerging markets that used APPs during the pandemic, provided that:
  - They remain consistent with the primary objective of monetary policy.
  - They keep a safe distance from the risk of fiscal dominance.

### Tapering, Unwinding, and Policy Sequencing
- As central banks in the region move towards monetary policy tightening, the tapering, ending, and unwinding of APPs must be carefully considered.
- Clear and transparent communication is critical at each step of the process, from the inception to the closure of APPs, particularly when a large shock hits and triggers a major policy shift.

### Subjects and Keywords
- Subjects: Central bank policy rate, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial services, Government securities, Monetary policy, Sovereign bonds, Yield curve.
- Keywords: asset purchase programs, Central bank policy rate, COVID-19 pandemic, Emerging and frontier financial markets, emerging market central banks, emerging market concern, Emerging markets, Europe, Global, Government securities, IMF library, market dysfunction, Monetary policy, Sovereign bonds, Yield curve.

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## Content in this bundle

- **Asset Purchase Programs in European Emerging Markets, IMF Departmental Paper No DP/2021/021**
  - [Asset Purchase Programs in European Emerging Markets, IMF Departmental Paper No DP/2021/021 (Markdown version)](/-/media/files/publications/dp/2021/english/appeemea.pdf.md){rel="alternate" type="text/markdown"}
  - [Asset Purchase Programs in European Emerging Markets, IMF Departmental Paper No DP/2021/021 (PDF)](/-/media/files/publications/dp/2021/english/appeemea.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/departmental-papers-policy-papers/issues/2021/09/23/asset-purchase-programs-in-european-emerging-markets-464648_