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Did QE Lead Banks to Relax Their Lending Standards? Evidence from the Federal Reserve's LSAPs

Robert J. Kurtzman, Stephan Luck and Tom Zimmermann
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Robert J. Kurtzman: https://www.federalreserve.gov/econres/robert-j-kurtzman.htm

No 2017-093, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using confidential loan officer survey data on lending standards and internal risk ratings on loans, we document an effect of large-scale asset purchase programs (LSAPs) on lending standards and risk-taking. We exploit cross-sectional variation in banks? holdings of mortgage-backed securities to show that the first and third round of quantitative easing (QE1 and QE3) significantly lowered lending standards and increased loan risk characteristics. The magnitude of the effects is about the same in QE1 and QE3, and is comparable to the effect of a one percentage point decrease in the Fed funds target rate.

Keywords: Banks; QE; Risk; SLOOS; Survey of Terms of Business Lending (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017-09-06
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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https://www.federalreserve.gov/econres/feds/files/2017093pap.pdf (application/pdf)

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Journal Article: Did QE lead banks to relax their lending standards? Evidence from the Federal Reserve’s LSAPs (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2017-93

DOI: 10.17016/FEDS.2017.093

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