International Capital Flows at the Security Level – Evidence from the ECB’s Asset Purchase Programme

IMF Working Papers, February 28, 2020

Source details

Canonical URL: International Capital Flows at the Security Level – Evidence from the ECB’s Asset Purchase Programme

Euro area investors—particularly investment funds and households—actively rebalanced away from securities targeted under the Public Sector Purchase Programme (PSPP) and other euro-denominated debt securities toward foreign debt instruments.
Rebalancing included flows into "closest substitutes", i.e., certain sovereign debt securities issued by non-euro area advanced countries.
The rebalancing was particularly strong during the first six quarters of the programme.
The analysis reveals marked differences across sectors and across country groups within the euro area, indicating that quantitative easing induced heterogeneous portfolio shifts.

Portfolio rebalancing at the security level during the ECB’s Asset Purchase Programme.
Heterogeneity of responses across investor sectors (investment funds, households, others).
Cross-border substitution into foreign debt instruments and sovereign debt of non-euro area advanced countries.
Timing dynamics with concentrated effects in the initial six quarters of the programme.

Subjects: Balance of payments, Capital flows, Financial institutions, Monetary policy, Mutual funds, Securities, Stocks, Unconventional monetary policies.
Keywords: capital flow, Capital flows, debt securities, euro, euro area, Euro area investor, euro-denominated securities, Global, International investment patterns, investment funds, investor heterogeneity, investors show, long-term debt, Mutual funds, net purchase, portfolio shift, PSPP eligibility, PSPP eligible, PSPP securities, PSPP substitute, quantitative easing, Securities, security holding, sovereign debt, Stocks, Unconventional monetary policies, WP.