21 Dec 2018

Event studies and the random walk hypothesis

Why the end of bond buying by the ECB is a non-event


The ending of the ECB’s bond buying programme had no impact on interest rates. In this blogpost published on the CEPR Policy Portal, Ansgar Belke and Daniel Gros argue that this is because while the programme might have lowered rates when it was announced, the impact was only transitory.

The ECB has now stopped its bond buying programme. It will keep its stock unchanged, but will make no new net purchases.  But neither the announcement nor the phasing out of the purchases seems to have had any impact on interest rates.

Most of the evidence on central bank bond buying, often called quantitative easing (QE), comes from ‘event studies’. These studies look at changes in interest rates around the dates when central banks announce their intention to buy large amounts of government bonds.

Read more on Vox here.