A regression discontinuity design for categorical ordered running variables applied to central bank purchases of corporate bonds

The paper quantifies the effects of the Eurosystem's purchases of corporate bonds issued by non-bank corporations established in the euro area on their spreads at issuance over the risk-free interest rate. To this end, a new econometric methodology has been developed, which allows us to evaluate the potential reduction in funding costs for the companies benefiting from the programme, following its announcement in March 2016.

A descriptive analysis reveals a significant reduction in the spreads at issuance of the bonds issued after the announcement of the programme. Our estimates suggest that the programme led to a decrease in the spreads at issurance of approximately 50 basis points for the bonds around the eligibility threshold (investment grade).