Unconventional Monetary Policy, Bank Lending, and Security Holdings: The Yield-Induced Portfolio-Rebalancing Channel

Karol Paludkiewicz

Journal of Financial and Quantitative Analysis, 2021, vol. 56, issue 2, 531-568

Abstract: This article studies the impact of unconventional monetary policy on bank lending and security holdings. I exploit granular security register data and use a difference- in-differences regression setup to provide evidence for a yield-induced portfolio rebalancing: Banks experiencing large average yield declines in their securities portfolio, induced by unconventional monetary policy, increase their real-sector lending more strongly relative to other banks. The effect is stronger for banks facing many reinvestment decisions. Moreover, I find that banks with large yield declines reduce their government bond holdings and sell securities bought under the asset-purchase program of the European Central Bank (ECB).

Date: 2021
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Related works:
Working Paper: Unconventional monetary policy, bank lending, and security holdings: The yield-induced portfolio rebalancing channel (2018)
Working Paper: Unconventional Monetary Policy, Bank Lending, and Security Holdings: The Yield-Induced Portfolio Rebalancing Channel (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:56:y:2021:i:2:p:531-568_6

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