Abstract
The large Public Sector Purchase Programme (PSPP), which the ECB started in 2015 for monetary policy purposes, had major side effects on fiscal policy. One concerns the programme’s uncommon seigniorage effects. We find that the PSPP not only led to partly negative seigniorage gains, but also produced super-seigniorage gains resulting from negative interest rates on the excess reserves that were created by the programme. Another effect of the PSPP is its interference with fiscal debt management, thereby making fiscal budgets more vulnerable to changes in short-term interest rates. Finally, the experience with the PSPP suggests that fiscal policy should prepare for a greater role in fighting future recessions.
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