Category: Funding

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ECB Asset Purchase Programs as a Liquidity Source and an Instrument in Times of Crisis

1. Introduction

The response of the European Central Bank (ECB) to the economic disruptions caused by the coronavirus is the Pandemic Emergency Purchase Program (PEPP). As in the financial and European debt crisis of 2007 onwards, the massive purchase of securities by the ECB is intended to “counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus outbreak”. This article focuses on the background of asset purchase programs which can be used by institutions as a source of liquidity. In addition, this paper examines both the qualitative and quantitative differences between the PEPP and ECB’s previous purchase programs and provides an outlook on further development of this funding vehicle.

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