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PSPP Bond Purchases as National Additional Money with Monetary Policy Relevance: A Reinterpretation of the ANFA Holdings in the Light of Recent Events

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European Union and Monetary Union in Permanent Crisis I
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Abstract

The ANFA agreement (Agreement on Net Financial Assets) allows national central banks of the euro area to hold assets for national, including fiscal, purposes, to the extent that they are compatible with the monetary policy objectives and tasks of the European System of Central Banks (ESCB). The article asks to what extent the PSPP government bond purchases (Public Sector Purchase Programme) can be considered functionally equivalent to the ANFA funds. The effects on the monetary policy steering of the ESCB, taking into account the PSPP purchases, are then examined. The results of the analysis are of particular relevance in the light of the judgment of the Federal Constitutional Court of 5 May 2020.

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Notes

  1. 1.

    BVerfG, ruling of the Second Senate of 05 May 2020—2 BvR 859/15 –, point 119. In the result, the ruling “is simply no longer comprehensible and therefore ultra vires” (point 116).

  2. 2.

    “As a result, 20% of asset purchases under the PSPP continue to be subject to the principle of risk sharing, while risk sharing is excluded for 80% of the securities acquired.” Deutsche Bundesbank (o. J.).

  3. 3.

    See Heinemann (2018), p. 3 ff. In addition, the asymmetry of the purchases over time has become more manifest: Among the five largest PSPP countries, the Eurosystem held disproportionately many Italian (10.2% different from the relevant capital share), Spanish (8.0%) and French (6.8%) government bonds at the end of July 2020, while too few Dutch (− 11.6%) and German (− 4.5%) bonds were in the PSPP portfolio. Source: Own calculations based on ECB data on Capital key and PSPP purchases.

  4. 4.

    König and Bernoth (2016a), p. 244 point out that the ECB can control the interest rate with a structural excess liquidity by issuing term deposits and thereby absorbing liquidity. They also argue that this procedure would be technically complicated and more expensive due to the interest rate differences.

  5. 5.

    Own calculations for 2020, based on the PSPP share of the APP being carried forward at 82% and with announced APP purchases of EUR 240 billion plus EUR 120 billion in response to the coronavirus pandemic, see European Central Bank (2020c).

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Correspondence to Dirk Meyer .

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Meyer, D. (2022). PSPP Bond Purchases as National Additional Money with Monetary Policy Relevance: A Reinterpretation of the ANFA Holdings in the Light of Recent Events. In: European Union and Monetary Union in Permanent Crisis I. Springer, Wiesbaden. https://doi.org/10.1007/978-3-658-38643-6_12

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