An assessment of the impact of the PSPP on Spanish public bonds
Studies in Economics and Finance
ISSN: 1086-7376
Article publication date: 9 October 2023
Issue publication date: 13 November 2023
Abstract
Purpose
The purpose of this study is to analyse the impact of the European Central Bank’s (ECB) Public Sector Purchase Programme (PSPP) on Spanish sovereign debt.
Design/methodology/approach
The authors assess the impact of the PSPP on Spanish Government bonds from two different transmission channels (the signalling and the portfolio substitution) with two effects for each of them (the announcement and the expectation effects for the former and the stock and the rebalancing effects for the latter). The empirical study has been undertaken with event study methodology, controlled by macroeconomic variables, panel data and cross-sectional regression analyses.
Findings
The results show that both the ECB’s purchases under the PSPP and the announcements reduced Spanish Government bond yields. Compared to previous literature the Spanish Government bond yields reductions are larger than those for other countries.
Research limitations/implications
The authors’ approach to the impact of investors’ expectations is interesting, although they cannot draw evidence on this issue due to the lack of data.
Practical implications
From an economic perspective, the ECB can change economic agents’ expectations without actually carrying out any programme, only by announcing such a programme.
Originality/value
This paper contributes to the literature examining the PSPP from different transmission channels in Spain, taking into account the announcements, the expectations, the purchases and the variation in debt holdings relating to the PSPP from the beginning of the programme until 2020. Due to the large degree of heterogeneity across euro area countries, the results in this paper should improve our understanding of the relative differences in the impact of the PSPP and, thus, be of interest to academics and policymakers.
Keywords
Acknowledgements
The authors thank participants at the 2021 IFABS (International Finance and Banking Society) conference at Saïd Business School, University of Oxford, as well as Harald Kinateder (the editor) and an anonymous referee for their many helpful comments and suggestions that substantially improved this paper. Francisco Sogorb-Mira acknowledges financial support from the Spanish Ministry of Science, Innovation and Universities and the European Regional Development Fund (ERDF) through grant PGC2018-095072-B-I00. All omissions and errors remain with the authors.
Citation
Izquierdo-Cervera, E. and Sogorb-Mira, F. (2023), "An assessment of the impact of the PSPP on Spanish public bonds", Studies in Economics and Finance, Vol. 40 No. 5, pp. 971-995. https://doi.org/10.1108/SEF-02-2023-0073
Publisher
:Emerald Publishing Limited
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