Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area

Christian Bittner, Alexander Rodnyansky, Farzad Saidi () and Yannick Timmer
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Christian Bittner: Deutsche Bundesbank and Goethe University Frankfurt
Alexander Rodnyansky: Presidential Offce of Ukraine, University of Cambridge, and CEPR
Farzad Saidi: University of Bonn and CEPR

No 292, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study the interaction of expansionary rate-based monetary policy and quantitative easing, despite their concurrent implementation, by exploiting heterogeneous banks and the introduction of negative monetary-policy rates in a fragmented euro area. Quantitative easing increases credit supply less, translating into weaker employment growth, when banks' funding costs do not decrease. Using administrative data from Germany, we uncover that among banks selling their securities, central-bank reserves remain disproportionately with high-deposit banks that are constrained due to sticky customer deposits at the zero lower bound. Affected German banks lend relatively less to firms while increasing their interbank exposure in the euro area.

Keywords: Negative Interest Rates; Quantitative Easing; Unconventional Monetary Policy; Bank Lending Channel (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 E63 F45 G20 G21 (search for similar items in EconPapers)
Pages: 70
Date: 2024-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mon
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_292_2024.pdf First version, 2024 (application/pdf)

Related works:
Working Paper: Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area (2024)
Working Paper: Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area (2023)
Working Paper: Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:292

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