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The effects of quantitative easing on bank lending behavior

Accepted version
Peer-reviewed

Type

Article

Change log

Authors

Rodnyansky, Alexander  ORCID logo  https://orcid.org/0000-0002-3085-8230
Darmouni, OM 

Abstract

Banks’ exposure to large-scale asset purchases, as measured by the relative prevalence of mortgage-backed securities on their books, affects lending following unconventional monetary policy shocks. Using a difference-in-differences identification strategy, this paper finds strong effects of the first and third round of quantitative easing (QE1 and QE3) on credit. Highly affected commercial banks increase lending by 2% to 3% relative to their counterparts. QE2 had no significant impact, consistent with its exclusive focus on Treasuries sparsely held by banks. Overall, banks respond heterogeneously, and the type of asset being targeted is central to QE.

Description

Keywords

38 Economics, 3502 Banking, Finance and Investment, 3801 Applied Economics, 35 Commerce, Management, Tourism and Services

Journal Title

Review of Financial Studies

Conference Name

Journal ISSN

0893-9454
1465-7368

Volume Title

30

Publisher

Oxford University Press (OUP)