{"title":"A Portfolio Model of Quantitative Easing","authors":"Jens H. E. Christensen, Signe Krogstrup","doi":"10.1142/s2010139222500112","DOIUrl":null,"url":null,"abstract":"<p>This paper presents a portfolio model of asset price effects arising from central bank large-scale asset purchases, or 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 is well known and derives from the reduced supply of the purchased assets. The other is new, runs through banks’ portfolio responses to reserves expansions, and is independent of the types of 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.</p>","PeriodicalId":45339,"journal":{"name":"Quarterly Journal of Finance","volume":"8 1","pages":""},"PeriodicalIF":0.9000,"publicationDate":"2022-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Journal of Finance","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1142/s2010139222500112","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper presents a portfolio model of asset price effects arising from central bank large-scale asset purchases, or 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 is well known and derives from the reduced supply of the purchased assets. The other is new, runs through banks’ portfolio responses to reserves expansions, and is independent of the types of 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.
期刊介绍:
The Quarterly Journal of Finance publishes high-quality papers in all areas of finance, including corporate finance, asset pricing, financial econometrics, international finance, macro-finance, behavioral finance, banking and financial intermediation, capital markets, risk management and insurance, derivatives, quantitative finance, corporate governance and compensation, investments and entrepreneurial finance.