The effects of ECB’s asset purchase programmes on corporate bond yields: Evidence from the eurobond market
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School of Business |
Master's thesis
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Date
2023
Department
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
38 + 7
Series
Abstract
Central banks across the nations are constantly monitoring the economy in order to deliver on their mandate of price stability. To reach their objectives central banks can set and adjust policy interest rates to either stimulate or slow down the economy. Followed by the financial crisis in 2008 and public debt crisis in Europe in subsequent years, the policy rates reached their effective lower bound, which deteriorated their effectiveness as policy tools. To accommodate central banks including the European Central Bank (ECB), introduced novel monetary policy measures - asset purchase programmes. With this new tool, which is often referred as unconventional monetary policy, ECB was able to purchase public and private securities from the market with an aim to lower the borrowing costs and thus stimulate the economic activity and economic conditions within the eurozone. This master’s thesis reviews the effect of ECB’s asset purchase programmes on corporate bond yields in the eurozone. Using corporate bond indices consisting of publicly listed corporate bonds in the eurozone and event study setting, the findings suggest that the asset purchase programmes indeed lowered the yields of corporate bonds. The results are aligned with the previous literature.Description
Thesis advisor
Välimäki, JuusoKeywords
corporate bonds, yields, ECB, asset purchase programmes