Template-type: ReDIF-Paper 1.0
Author-Name: Jens H. E. Christensen
Author-Name-First: Jens H. E.
Author-Name-Last: Christensen
Author-Person: pch1126
Author-Name: Signe Krogstrup
Author-Name-First: Signe
Author-Name-Last: Krogstrup
Author-Person: pkr44
Title: A Portfolio Model of Quantitative Easing
Abstract: This paper presents a portfolio model of asset price effects arising from central bank large-scale asset purchases, commonly known as quantitative easing (QE). Two financial frictions—segmentation of the market for central bank reserves and imperfect asset substitutability—give rise to two distinct portfolio effects. One derives from the reduced supply of the purchased assets. The other runs through banks’ portfolio responses to the created reserves and is independent of the assets purchased. The results imply that central bank reserve expansions can affect long-term bond prices even in the absence of long-term bond purchases.
Length: 28 pages
Creation-Date: 2016
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2016/working_paper_2016_19
File-Format: text/html
Number: 2016-19
Classification-JEL: G11, E43, E50, E52, E58
Keywords: unconventional monetary policy, transmission, reserve-induced portfolio balance channel
Handle: RePEc:snb:snbwpa:2016-19