[1] When faced with negative output gaps and policy interest rates approaching their effective lower bound, these programmes have given central banks an essential tool to continue providing additional monetary accommodation, and prevent their domestic economies from falling into a deflationary trap. Yet, in a world of integrated financial markets, purchase programmes do not only have domestic effects.
This has been recognised by policymakers in the past. For example, there has been a lively debate about the effects of the Federal Reserve’s purchase programmes on financing conditions in emerging market economies. [2] However, less attention has been paid to this aspect in the case of the euro area – that is, the international spillovers of the ECB’s asset purchase programme (APP).