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Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP

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  4. Vol. 54, Issue 2
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Havlik, A., Heinemann, F. Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP. Credit and Capital Markets – Kredit und Kapital, 54(2), 173-197. https://doi.org/10.3790/ccm.54.2.173
Havlik, Annika and Heinemann, Friedrich "Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP" Credit and Capital Markets – Kredit und Kapital 54.2, 2021, 173-197. https://doi.org/10.3790/ccm.54.2.173
Havlik, Annika/Heinemann, Friedrich (2021): Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP, in: Credit and Capital Markets – Kredit und Kapital, vol. 54, iss. 2, 173-197, [online] https://doi.org/10.3790/ccm.54.2.173
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Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP

Havlik, Annika | Heinemann, Friedrich

Credit and Capital Markets – Kredit und Kapital, Vol. 54 (2021), Iss. 2 : pp. 173–197

5 Citations (CrossRef)

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.54.2.173
Language
English
Pages
25
Keywords

Author Details

Dr. Annika Havlik, ZEW Mannheim, L7, 1, 68161 Mannheim.

Prof. Dr. Friedrich Heinemann, ZEW Mannheim, L7, 1, 68161 Mannheim.

Cited By

  1. Dispelling the shadow of fiscal dominance? Fiscal and monetary announcement effects for euro area sovereign spreads in the corona pandemic

    Havlik, Annika | Heinemann, Friedrich | Helbig, Samuel | Nover, Justus

    Journal of International Money and Finance, Vol. 122 (2022), Iss. P.102578

    https://doi.org/10.1016/j.jimonfin.2021.102578 [Citations: 15]

  2. The ECB Under the Threat of Fiscal Dominance – The Individual Central Banker Dimension

    Heinemann, Friedrich | Kemper, Jan

    The Economists’ Voice, Vol. 18 (2021), Iss. 1 P.5

    https://doi.org/10.1515/ev-2021-0014 [Citations: 4]

  3. Finance, Law, and the Crisis of COVID-19

    ECB’s Pandemic Emergency Purchase Programme from Legal Perspective

    Schweigl, Johan

    2022

    https://doi.org/10.1007/978-3-030-89416-0_4 [Citations: 0]

  4. Die Überdeckung der Next Generation EU-Schulden im neuen EU-Eigenmittelbeschluss: Ausmaß und Haftungskonsequenzen

    Heinemann, Friedrich

    List Forum für Wirtschafts- und Finanzpolitik, Vol. 47 (2021), Iss. 2-4 P.133

    https://doi.org/10.1007/s41025-021-00234-3 [Citations: 3]

  5. Modern Monetary Theory, Fiscal Dominance and the European Central Bank

    Prinz, Aloys | Beck, Hanno

    Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 4 P.431

    https://doi.org/10.3790/ccm.55.4.431 [Citations: 0]

References

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  2. Belke, A./Gros, D. (2019): QE in the Euro Area: Has the PSPP Benefited Peripheral Bonds? CEPS Working Document, March 2019.  Google Scholar
  3. Blommestein, H. J./Turner, P. (2012): Interactions between Soverign Debt Management and Monetary Policy under Fiscal Dominance and Financial Instability, OECD Working Papers on Sovereign Borrowing and Public Debt Management, No. 3.  Google Scholar
  4. Bordo, M. D./Levy, M. D. (2020): Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record, NBER Working Paper 28195.  Google Scholar
  5. Bundesverfassungsgericht (2020): Judgment of the Second Senate of 5 May 2020 – 2 BVR 859/15.  Google Scholar
  6. Economic and Financial Committee (2011): EFC Sub-Committee on EU Sovereign Debt Markets Collective Action Clause Explanatory Note, 26 July 2011.  Google Scholar
  7. Eser, F./Schwaab, B. (2016): Evaluating the Impact of Unconventional Monetary Policy Measures: Empirical Evidence from the ECB’ S Securities Markets Programme, Journal of Financial Economics, Vol. 119(1): 147–167.  Google Scholar
  8. Esteves, R./Sussman, N. (2020): The Covid-19 and Bond Spreads, The Economists’ Voice, Vol. 17(1 (20200013)): 1–10.  Google Scholar
  9. European Central Bank. (2010): Decision of the European Central Bank of 14 May 2010 Establishing a Securities Markets Programme (ECB/2010/5).  Google Scholar
  10. European Central Bank (2012): Technical Features of Outright Monetary Transactions, ECB Press Release 6 September 2012.  Google Scholar
  11. European Central Bank (2015): Decision (EU) 2015/774 of the European Central Bank of 4 March 2015 on a Secondary Markets Public Sector Asset Purchase Programme (ECB/2015/10).  Google Scholar
  12. European Central Bank (2020a): Decision (EU) 2020/188 of the European Central Bank of 3 February 2020 on a Secondary Markets Public Sector Asset Purchase Programme (ECB/2020/9).  Google Scholar
  13. European Central Bank (2020b): Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a Temporary Pandemic Emergency Purchase Programme (ECB/2020/17).  Google Scholar
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  23. Grund, S. (2016): The European Central Bank’s Public Sector Purchase Programme (PSPP), the Prohibition of Monetary Financing and Sovereign Debt Restructuring Scenarios, European Law Review.  Google Scholar
  24. Hansen, A./Meyer, D. (2020): Das PSPP-Staatsanleiheprogramm – Empirische Daten und Regelwerk stellen das Urteil des BVerfG teilweise infrage, ifo Schnelldienst, Vol. 73(10): 37–46.  Google Scholar
  25. Hartley, J. S./Rebucci, A. (2020): An Event Study of Covid-19 Central Bank Quantitative Easing in Advanced and Emerging Economies, NBER Working Paper 27339.  Google Scholar
  26. Havlik, A./Heinemann, F./Helbig, S./Nover, J. (2021): Dispelling the Shadow of Fiscal Dominance? Fiscal and Monetary Announcement Effects for Euro Area Sovereign Spreads in the Corona Pandemic, ZEW Discussion Paper 21–050.  Google Scholar
  27. Koetter, M./Podlich, N./Wedow, M. (2017): Inside Asset Purchase Programs: The Effects of Unconventional Monetary Policy on Banking Competition, ECB Working Paper 2017.  Google Scholar
  28. Krishnamurthy, A./Nagel, S./Vissing-Jorgensen, A. (2017): ECB Policies Involving Government Bond Purchases: Impact and Channels, Review of Finance, Vol. 22(1): 1–44.  Google Scholar
  29. Lane, P. R. (2020a): The ECB’s Monetary Policy Response to the Pandemic: Liquidity, Stabilisation and Supporting the Recovery, Speech 24 June 2020.  Google Scholar
  30. Lane, P. R. (2020b): The Market Stabilisation Role of the Pandemic Emergency Purchase Programme, the ECB Blog, 22 June 2020.  Google Scholar
  31. Lehment, H. (2018): Fiscal Implications of the ECB’s Public Sector Purchase Programme (PSPP): Kiel Working Paper.  Google Scholar
  32. Schnabel, I. (2020): The Shadow of Fiscal Dominance: Misconceptions, Perceptions and Perspectives, Speech, 11 September 2020.  Google Scholar
  33. Schrörs, M. (2020): Dauerhafte Staatsfinanzierung gehört nicht zur Rolle der EZB, Interview mit Volker Wieland, Börsen-Zeitung.  Google Scholar
  34. Smith, A. (2020): The European Central Bank’s Securities Market Programme (ECB GFC), Journal of Financial Crises, Vol. 2(3): 369–382.  Google Scholar
  35. Urbschat, F./Watzka, S. (2020): Quantitative Easing in the Euro Area – an Event Study Approach, The Quarterly Review of Economics and Finance, Vol. 77: 14–36.  Google Scholar
  36. Wyplosz, C. (2019): Limits to the Independence of the ECB, Review of World Economics, Vol. 155(1): 35–41.  Google Scholar
  37. Bordo, M. D./Levy, M. D. (2020): Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record, NBER Working Paper 28195.  Google Scholar
  38. Bundesverfassungsgericht (2020): Judgment of the Second Senate of 5 May 2020 – 2 BVR 859/15.  Google Scholar
  39. Economic and Financial Committee (2011): EFC Sub-Committee on EU Sovereign Debt Markets Collective Action Clause Explanatory Note, 26 July 2011.  Google Scholar
  40. Eser, F./Schwaab, B. (2016): Evaluating the Impact of Unconventional Monetary Policy Measures: Empirical Evidence from the ECB’ S Securities Markets Programme, Journal of Financial Economics, Vol. 119(1): 147–167.  Google Scholar
  41. Esteves, R./Sussman, N. (2020): The Covid-19 and Bond Spreads, The Economists’ Voice, Vol. 17(1 (20200013)): 1–10.  Google Scholar
  42. European Central Bank. (2010): Decision of the European Central Bank of 14 May 2010 Establishing a Securities Markets Programme (ECB/2010/5).  Google Scholar
  43. European Central Bank (2012): Technical Features of Outright Monetary Transactions, ECB Press Release 6 September 2012.  Google Scholar
  44. European Central Bank (2015): Decision (EU) 2015/774 of the European Central Bank of 4 March 2015 on a Secondary Markets Public Sector Asset Purchase Programme (ECB/2015/10).  Google Scholar
  45. European Central Bank (2020a): Decision (EU) 2020/188 of the European Central Bank of 3 February 2020 on a Secondary Markets Public Sector Asset Purchase Programme (ECB/2020/9).  Google Scholar
  46. European Central Bank (2020b): Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a Temporary Pandemic Emergency Purchase Programme (ECB/2020/17).  Google Scholar
  47. European Commission (2020): European Economic Forecast, Autumn 2020, European Economy, Institutional Paper, 136, November 2020.  Google Scholar
  48. European Court of Justice (2015a): Judgment of the Court (Grand Chamber) of 16 June 2015, C-62/14 – Gauweiler and Others.  Google Scholar
  49. European Court of Justice (2015b): Judgment of the General Court (Fourth Chamber) of 7 October 2015, C-398/33 – Accorinti and Others.  Google Scholar
  50. European Court of Justice (2018): Judgment of the Court (Grand Chamber) of 11 December 2018, C-493/17 – Weiss and Others.  Google Scholar
  51. Fang, C./Schumacher, J./Trebesch, C. (2018): Do Collective Action Clauses Work?, Paper presented at the Federal Ministry of Finance Fiscal Policy Seminar, 13 December 2018.  Google Scholar
  52. Feld, L. P./Fuest, C./Haucap, J./Schweitzer, H./Wieland, V./Wigger, B. U. (2016): Das entgrenzte Mandat der EZB, Das OMT-Urteil des EUGH und seine Folgen, Berlin.  Google Scholar
  53. Fischer, M. (2020): How the Corona Pandemic Is Plunging the Monetary System into Crisis, The Economists’ Voice, Vol. 17(1 (20200019)): 1–6.  Google Scholar
  54. Folkerts-Landau, D./Schneider, S. (2017): Backdoor Socialization, Expropriated Savers and Asset Bubbles – the Dark Side of QE, IMFS Interdisciplinary Studies in Monetary and Financial Stability 1/2017: 22–29.  Google Scholar
  55. Ghysels, E./Idier, J./Manganelli, S./Vergote, O. (2017): A High-Frequency Assessment of the ECB Securities Markets Programme, Journal of the European Economic Association, Vol. 15(1): 218–243.  Google Scholar
  56. Grund, S. (2016): The European Central Bank’s Public Sector Purchase Programme (PSPP), the Prohibition of Monetary Financing and Sovereign Debt Restructuring Scenarios, European Law Review.  Google Scholar
  57. Hansen, A./Meyer, D. (2020): Das PSPP-Staatsanleiheprogramm – Empirische Daten und Regelwerk stellen das Urteil des BVerfG teilweise infrage, ifo Schnelldienst, Vol. 73(10): 37–46.  Google Scholar
  58. Hartley, J. S./Rebucci, A. (2020): An Event Study of Covid-19 Central Bank Quantitative Easing in Advanced and Emerging Economies, NBER Working Paper 27339.  Google Scholar
  59. Havlik, A./Heinemann, F./Helbig, S./Nover, J. (2021): Dispelling the Shadow of Fiscal Dominance? Fiscal and Monetary Announcement Effects for Euro Area Sovereign Spreads in the Corona Pandemic, ZEW Discussion Paper 21–050.  Google Scholar
  60. Koetter, M./Podlich, N./Wedow, M. (2017): Inside Asset Purchase Programs: The Effects of Unconventional Monetary Policy on Banking Competition, ECB Working Paper 2017.  Google Scholar
  61. Krishnamurthy, A./Nagel, S./Vissing-Jorgensen, A. (2017): ECB Policies Involving Government Bond Purchases: Impact and Channels, Review of Finance, Vol. 22(1): 1–44.  Google Scholar
  62. Lane, P. R. (2020a): The ECB’s Monetary Policy Response to the Pandemic: Liquidity, Stabilisation and Supporting the Recovery, Speech 24 June 2020.  Google Scholar
  63. Lane, P. R. (2020b): The Market Stabilisation Role of the Pandemic Emergency Purchase Programme, the ECB Blog, 22 June 2020.  Google Scholar
  64. Lehment, H. (2018): Fiscal Implications of the ECB’s Public Sector Purchase Programme (PSPP): Kiel Working Paper.  Google Scholar
  65. Schnabel, I. (2020): The Shadow of Fiscal Dominance: Misconceptions, Perceptions and Perspectives, Speech, 11 September 2020.  Google Scholar
  66. Schrörs, M. (2020): Dauerhafte Staatsfinanzierung gehört nicht zur Rolle der EZB, Interview mit Volker Wieland, Börsen-Zeitung.  Google Scholar
  67. Smith, A. (2020): The European Central Bank’s Securities Market Programme (ECB GFC), Journal of Financial Crises, Vol. 2(3): 369–382.  Google Scholar
  68. Urbschat, F./Watzka, S. (2020): Quantitative Easing in the Euro Area – an Event Study Approach, The Quarterly Review of Economics and Finance, Vol. 77: 14–36.  Google Scholar
  69. Wyplosz, C. (2019): Limits to the Independence of the ECB, Review of World Economics, Vol. 155(1): 35–41.  Google Scholar
  70. Altavilla, C./Carboni, G./Motto, R. (2015): Asset Purchase Programmes and Financial Markets: Lessons from the Euro Area, ECB Working Paper 1864.  Google Scholar
  71. Belke, A./Gros, D. (2019): QE in the Euro Area: Has the PSPP Benefited Peripheral Bonds? CEPS Working Document, March 2019.  Google Scholar
  72. Blommestein, H. J./Turner, P. (2012): Interactions between Soverign Debt Management and Monetary Policy under Fiscal Dominance and Financial Instability, OECD Working Papers on Sovereign Borrowing and Public Debt Management, No. 3.  Google Scholar

Abstract

This study analyzes trends in the Eurosystem’s rules and country allocations of the Public Sector Purchase Program (PSPP) and the Pandemic Emergency Purchase Program (PEPP). The synopsis of purchase rules reveals how the ECB Council has loosened the initially strict constraints over time and various dimensions. For the year 2020, the analysis shows that the divergences of net purchases from the ECB capital key are substantive. The analysis of the PSPP stocks since 2015 illustrates that this increasing divergence from the capital key was on its way already before the pandemic. A final step of the analysis puts the PSPP/PEPP net purchases in proportion to current fiscal indicators. These results prove that, for several euro countries, the central bank net purchases fully match even the exceptionally high borrowing requirements of 2020. The study concludes with reflections on the challenges for a program exit after the end of the pandemic.

Table of Contents

Section Title Page Action Price
Annika Havlik / Friedrich Heinemann: Sliding Down the Slippery Slope? Trends in the Rules and Country Allocations of the Eurosystem’s PSPP and PEPP 1
Abstract 1
I. Introduction 1
II. PSPP and PEPP Rules 7
III. Effective National Allocations in the Crisis Year 1
IV. Trends in Divergence from Capital Key since the Start of PSPP 1
V. Macroeconomic Magnitude 2
VI. Conclusions 2
References 2

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