The impact of the Eurosystem’s asset purchase programmes on the cost of funding

Abstract

The purpose of this work is to investigate the impacts of the ECB asset purchase programme (APP) on the cost of funding by countries and companies from the eurozone. For the empirical analysis, it was considered 23,283 observations that are divided into two categories: 9,053 sovereign bonds and 14,830 corporate bonds, issued by eurozone states and corporates between January 1, 2000 and December 31, 2016. The method used to answer the research questions was an OLS regression (least squares method).
The results showed that the following asset purchase programs: CBPP1 and CBPP3 met the ECB goals and contributed positively to the reduction of the medium-term financing costs of euro area states and companies. On the other hand, CBPP2 and CSPP had an adverse effect on ECB policy, leading to an increase in yields.
Furthermore, it was demonstrated that in PIIGS, only CBPP3 had the desired effect of YTM reduction in the CB issues. On the other hand, as in the emissions of German companies, CBPP2 caused an increase in the YTM of CB emissions in PIIGS. Regarding the impact of SB on PIIGS YTMs, it was found that both CBPP1 and CBPP3 had a reducing effect, whereas the CBPP2 and CSPP programs had an adverse effect on what was expected from the ECB, since they led to an increase of the YTM in PIIGS.
Finally, the results also displayed that the variables that have had the most significant effect on the SB and CB yield to maturity of PIIGS were the sovereign debt crisis, the risk-free rate and the “tranche to transaction” variable.

Date of Award	17 Jul 2018
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)