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Euro-Area Quantitative Easing and Portfolio Rebalancing

Ralph S. J. Koijen^1,2; François Koulischer³; Benoît Nguyen⁴; Motohiro Yogo⁵

¹ Center for Economic and Policy Research · ² New York University · ³ Central Bank of Luxembourg · ⁴ Banque de France · ⁵ Princeton University

We use new and comprehensive data on the security holdings of euro-area investors to document facts about the ongoing quantitative easing program. The holdings of purchase-eligible government bonds have strong home bias not only for banks but also for insurance companies, pension funds, and mutual funds, especially in the vulnerable countries. In response to the program, foreign investors sold most of the purchase-eligible government bonds. Banks also sold purchase-eligible government bonds to a lesser extent, but insurance companies and pension funds bought them. Thus, quantitative easing may have reduced the duration mismatch for these institutions.

DOI

10.1257/aer.p20171037

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