We introduce our top-down approach to ECB's PSPP holdings by a reiterative modelling approach.
In December 2015, the ECB decided to reinvest the principal of maturing bonds under its APP ' for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary'.
The decision to reinvest the maturing principal from its around EUR2trl stock of purchases plays an integral part in ECB's monetary policy stance.
Looking further ahead, reinvestments will play an increasingly important role for ECB monetary policy stance in 2019 and 2020, before settling slightly lower in 2021 and later. At that stage, potential gradual reduction of ECB's balance sheet could soften the downward pressure from reinvestments, but not until 2021 or beyond.
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