The Impact of Corporate QE on Liquidity

Evidence from the UK

Bibliographic Data

ID9709641
AuthorsLena Boneva (European Central Bank & CEPR , Germany), David Elliott (0000-0002-4353-2539, Bank of England & Imperial College London , UK, corresponding author), Iryna Kaminska (Bank of England), Oliver Linton (0000-0003-2313-0564, University of Cambridge), Nick McLaren (Bank of England), Ben Morley (Ben Morley worked on this paper whilst at the Bank of England)
Year2022
Volume132
Issue648
Pages2615-2643
Publication date2022-11-07
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueac033
OpenAlexW3124705247
LanguageEN
References cited26

There is substantial uncertainty about the impact of quantitative easing on market liquidity. Identifying the impact is particularly challenging due to the potential for reverse causality, because liquidity considerations might affect quantitative easing purchases. We address this challenge by studying the Bank of England’s 2016–7 Corporate Bond Purchase Scheme. In particular, we use granular offer-level data from the Corporate Bond Purchase Scheme auctions to construct proxy measures for the Bank of England's demand for bonds and auction participants’ supply of bonds, allowing us to control for any reverse causality from liquidity to purchases. We find that Corporate Bond Purchase Scheme purchases improved the liquidity of purchased bonds

Bond · Business · Causality (physics · Central bank · Common value auction · Corporate bond · Economics · Financial economics · Liquidity crisis · Liquidity premium · Market liquidity · Microeconomics · Monetary economics · Monetary policy · Open market operation · Proxy (statistics · Quantitative easing · Banking stability, regulation, efficiency · Finance · Financial Markets and Investment Strategies · Housing Market and Economics

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