Quantitative easing, portfolio rebalancing and credit growth: Micro evidence from Germany
No 20/2018, Discussion Papers from Deutsche Bundesbank
This paper sheds light on the effect of quantitative easing (QE) on bank lending. Using data on German banks for 2014-2016, I show that QE encourages banks to rebalance from securities to loans. For identification, I use bond redemptions as exogenous variation in banks' need to rebalance their portfolio and hence their exposure to QE. I find that more exposed banks increase their loan growth during QE relative to other banks. The growth differential is larger when bond market yields decrease stronger than loan market yields and for banks with equity constraints. These results imply that QE can affect bank lending even if banks do not hold assets purchased under the QE program, by increasing incentives to invest in higher-yield assets.
Keywords: quantitative easing; bank lending; proprietary trading; monetary transmission (search for similar items in EconPapers)
JEL-codes: E51 E58 G11 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:202018
Access Statistics for this paper
More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().