The Impact of Central Bank Stock Purchases: Evidence from Discontinuities in Policy Rules
We trace the impact of central bank stock purchases by exploiting discontinuities in the Bank of Japan's policy rule, which triggers purchases when stock market index movements fall below a threshold. In normal times, the purchases raise the long-term interest rate while leaving no detectable impact on stock prices. After the introduction of yield curve control, which pegs the long-term yield at 0%, interest rates stop responding and stock prices rise robustly following the purchases. Although these results are inconsistent with the inelastic market hypothesis in its original form, general equilibrium extensions with endogenous interest rates explain our findings.
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Copy CitationMasao Fukui and Masayuki Yagasaki, "The Impact of Central Bank Stock Purchases: Evidence from Discontinuities in Policy Rules," NBER Working Paper 35886 (2026), https://doi.org/10.3386/w35886.Download Citation
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