QE and the bank lending channel in the United Kingdom

Nick Butt (), Rohan Churm, Michael McMahon, Arpad Morotz () and Jochen Schanz
Additional contact information
Nick Butt: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Arpad Morotz: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 511, Bank of England working papers from Bank of England

Abstract: We test whether quantitative easing (QE) provided a boost to bank lending in the United Kingdom, in addition to the effects on asset prices, demand and inflation focused on in most other studies. Using a data set available to researchers at the Bank, we use two alternative approaches to identify the effects of variation in deposits on individual banks' balance sheets and test whether this variation in deposits boosted lending. We find no evidence to suggest that QE operated via a traditional bank lending channel (BLC) in the spirit of the model due to Kashyap and Stein. We show in a simple BLC framework that if QE gives rise to deposits that are likely to be short-lived in a given bank (‘flighty’ deposits), then the traditional BLC is diminished. Our analysis suggests that QE operating through a portfolio rebalancing channel gave rise to such flighty deposits and that this is a potential reason that we find no evidence of a BLC. Our evidence is consistent with other studies which suggest that QE boosted aggregate demand and inflation via portfolio rebalancing channels.

Keywords: Monetary policy; bank lending channel; quantitative easing (search for similar items in EconPapers)
JEL-codes: E51 E52 G20 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-09-19
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Related works:
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the bank lending channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0511

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