 The economic consequences of the TARP: The effectiveness of bank recapitalization policies in the U.SHeather Montgomery and Yuki Takahashi Japan and the World Economy, 2014, vol. 32, issue C, 49-64 Abstract: This study empirically analyzes the impact of the United States’ bank recapitalization program, the centerpiece of the United States’ $700 billion Troubled Asset Relief Program (TARP), on bank portfolios. Through superior empirical analysis and correct model specification, our findings overturn much of the existing literature on the effectiveness of capital injections into the banking sector in Japan and the United States. We show that the TARP program did not achieve the stated policy objective of stimulating bank lending. On the contrary, we find evidence that recipient banks grew assets significantly slower, particularly heavily risk-weighted assets such as loans. These findings are robust to various empirical specifications, including two-stage least squares estimation using instrumental variables, difference-in-difference techniques and generalized method of moments. These techniques control for pre-existing trends in loan growth while addressing potential endogeneity bias. Keywords: Bank; Crisis; Recapitalization; Capital; TARP (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:32:y:2014:i:c:p:49-64 DOI: 10.1016/j.japwor.2014.07.004 Access Statistics for this article Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao More articles in Japan and the World Economy from Elsevier |
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