Does Quantitative Easing Boost Bank Lending to the Real Economy or Cause Other Bank Asset Reallocation? The Case of the UK

Simone Giansante, Mahmoud Fatouh and Steven Ongena
Additional contact information
Mahmoud Fatouh: University of Essex; Bank of England

No 19-72, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We investigate the impact of the Bank of England’s asset purchase program (APP) on the composition of assets of UK banks, and to the implications for the real economy, using a unique database on the program. The identification of banks that receives deposits (QE banks) injections by the program as well as the magnitude of these injections provides the ideal empirical design for a difference-in-difference matching exercise. We find no evidence that suggests QE boosted bank lending to the real economy. The overall reduction of retail lending was more pronounce for treated (QE) banks than for the control group. QE banks reallocated their assets towards lower risk weighted investments, such as government securities and reserves, as confirmed by the increased sensitivity of their equity returns on peripheral EU bond returns. Our findings suggest that risk weighted based capital constraints can limit the effectiveness of expansionary unconventional monetary policies and provide incentives on carry trade activities.

Keywords: monetary policy; quantitative easing; bank lending (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3446293 (application/pdf)

Related works:
Working Paper: Does quantitative easing boost bank lending to the real economy or cause other bank asset reallocation? The case of the UK (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1972

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().