More specifically, once the purchase of government bonds by a central bank is perceived as financing government debt and not conducted for the purpose of monetary policy, this could instead invite a hike in long-term interest rates and lead to financial market instability.
In contrast, the European Stability Mechanism (ESM), which was launched a decade later than the CMIM, has been actually used and has contributed to preventing several regional contagions.3 As for the ABMI, the size of regional local currency bond markets has increased more than four times since its launch. 4 And there have been other tangible results too, including improved bond market liquidity.