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Fiscal implications of the ECB’s bond buying program

de Grauwe, Paul and Ji, Yuemei (2013) Fiscal implications of the ECB’s bond buying program. Open Economies Review, 24 (5). pp. 843-852. ISSN 0923-7992

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Identification Number: 10.1007/s11079-013-9284-6


The perception that the government bond buying program (OMT) announced by the ECB may lead to future tax burdens on countries, in particular on Germany, is based on an erroneous application of solvency principles that apply to private agents, but not to central banks. We argue that the creditor nations' taxpayers, in particular the German taxpayers, will receive tax revenue from the implementation of the OMT. We also measure the size of the bond-buying program that is compatible with price stability. It turns out that this estimate critically depends on whether the Eurozone stays in a liquidity trap situation or not. Today, as the Eurozone is still in a liquidity trap there is no limit to the amount of government bonds the ECB can buy without triggering inflation.

Item Type: Article
Official URL:
Additional Information: © 2013 Springer Science+Business Media New York
Divisions: European Institute
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
F - International Economics > F3 - International Finance
Date Deposited: 30 Aug 2013 14:11
Last Modified: 20 Oct 2021 02:04

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