Heterogeneous macro and financial effects of ECB asset purchase programs

Abstract

Like other central banks, the ECB resorted to asset purchase programs (APPs) to replace conventional policy measures. We examine their impact on the Euro area with a focus on the heterogeneity among its constituents and across financial markets. Our analysis combines a Bayesian structural VAR with an identification scheme based on market surprises at the announcement time, effectively capturing structural dynamics. At the Euro area level, APPs stimulate the economy, lower government bond yields, elevate stock prices, and reduce corporate and sovereign stress. The impact shows heterogeneity in the stock market with a widened value-growth spread in stocks and varying sector impacts, particularly favoring financial stocks, and across countries with stronger effects on southern Euro area countries. Our results show strong spillover effects between countries, indicating challenges in the precise targeting of APPs.