An Event Study of COVID-19 Central Bank Quantitative Easing in Advanced and Emerging Economies
Amid the COVID-19 outbreak and related expected economic downturn, many developed and emerging market central banks around the world engaged in new long-term asset purchase programs, or so-called quantitative easing (QE) interventions. This paper conducts an event-study analysis of 24 COVID-19 QE announcements made by 21 global central banks on their local 10-year government bond yields. We find that the average developed market QE announcement had a statistically significant -0.14% 1-day impact, which is slightly smaller than past interventions during the Great Recession era. In contrast, the average impact of emerging market QE announcements was significantly larger, averaging -0.28% and -0.43% over 1-day and 3-day windows, respectively. Across developed and emerging bond markets, we estimate an overall average 1-day impact of -0.23%. We also show that all 10-year government bond yields in our sample rose sharply in mid-March 2020, but fell substantially after the period of QE announcements that we study in the paper.
We are grateful to Reid Brotmann for excellent research assistance. We thank Ambrogio Cesa-Bianchi and Gianluca Benigno for comments. The usual disclaimers apply. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.