This paper uses a theoretical model for the euro area to evaluate the effects of a central bank asset purchase programme, distinguishing between the open-ended case, in which the central bank communicates that the expected duration of the purchases depends on future inflation developments, and the case in which an end date for the purchases is announced.
The results show that, when expected inflation is below the target, an open-ended programme is more effective in sustaining price dynamics than a programme with an announced end date because it generates expectations of additional future purchases. Moreover, an open-ended programme makes it possible to effectively counteract recessionary shocks that may materialize before the end of the purchases.
Published in 2019 in: Journal of Policy Modeling, v. 41, 6, pp. 1144-1159
