An Empiricial Study on the Impact of the European Central Bank's Asset Purchase Programme on the European Green Bond Market

Abstract

In this empirical study, we investigate the causal effect of the European Central Bank's announcement of its green bond purchase under the Corporate Sector Purchase Program in 2016 on the European green bond market. Employing a Difference-in-Difference analysis, we find that the announcement has positively impacted the green bond market in Europe in the short term, resulting in increased demand, higher bond prices, and lower yield to maturity. Nevertheless, capturing causal effects over an extended period becomes complex without obtaining error estimates. Thus, based on our findings, there is suggestive evidence that the European Central Bank's announcement has stimulated the green bond market in Europe, particularly in the isolated context of the short-term period.