Download or read book Unconventional Monetary Policy and Bank Lending Relationships written by Christophe Cahn and published by . This book was released on 2019 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: How do banks transmit long-term central bank liquidity injections to borrowers? We exploit unique variation in how the ECB's 2011-12 Long-Term Refinancing Operations (LTROs) affected lending to firms discontinuously across credit ratings (within banks) to make four contributions. (i) We show the LTROs induced increased bank lending to firms in France, including to SMEs, an elusive policy objective. (ii) We uncover important heterogeneity: banks pass through LTRO liquidity very differently to multi- bank firms than they do to firms with only one bank. (iii) Differences in liquidity transmission map to archetypal lending types: single-bank firms receive relationship lending, and these firms invest and grow in response, while multi-bank firms receive transactions-style lending and do not increase their investment. (iv) While the majority of the effect flows to firms whose loans are policy-eligible, we identify a spillover (onto multi-bank firms only) that appears to be driven by bank competition for borrowers.

Download or read book Negative Monetary Policy Rates and Portfolio Rebalancing Evidence from Credit Register Data written by Margherita Bottero and published by International Monetary Fund. This book was released on 2019-02-28 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Download or read book The Bank Lending Channel of Unconventional Monetary Policy written by Miguel Garcia-Posada and published by . This book was released on 2015 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We assess the impact on the credit supply to non-financial corporations of the two very-long-term refinancing operations (VLTROs) conducted by the Eurosystem in December 2011 and February 2012 for the case of Spain. To do so we use bank-firm level information from a sample of more than one million lending relationships over two years. Our methodology tackles the two main identification challenges: (i) how to disentangle credit supply from demand; and (ii) the endogeneity of VLTRO bids, as banks with more deteriorated funding conditions were more likely both to ask for a large amount of funds and to restrict credit supply. First, we exploit the fact that many firms simultaneously borrow from several banks to effectively control for firm-specific credit demand. Second, we exhaustively control for banks' funding difficulties by constructing several measures of balance-sheet strength and by including bank fixed effects. Our findings suggest that the VLTROs had a positive moderately-sized effect on the supply of bank credit to firms, providing evidence of a bank lending channel in the context of unconventional monetary policy. We also find that the effect was greater for illiquid banks and that it was driven by credit to SMEs, as there was no impact on loans to large firms.

Download or read book The Impact of Unconventional Monetary Policy Measures by the Systemic Four on Global Liquidity and Monetary Conditions written by Ms.Yevgeniya Korniyenko and published by International Monetary Fund. This book was released on 2015-12-30 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper examines the impact of unconventional monetary policy measures (UMPMs) implemented since 2008 in the United States, the United Kingdom, Euro area and Japan— the Systemic Four—on global monetary and liquidity conditions. Overall, the results show positive significant relationships. However, there are differences in the impact of the UMPMs of individual S4 countries on these conditions in other countries. UMPMs of the Bank of Japan have positive association with global liquidity but negative association with securities issuance. The quantitative easing (QE) of the Bank of England has the opposite association. Results for the quantitative easing measures of the United States Federal Reserve System (U.S. Fed) and the ECB UMPMs are more mixed.

Download or read book Bank Leverage and Monetary Policy s Risk Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Download or read book More Stories of Unconventional Monetary Policy written by Evan Karson and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article extends the work of Fawley and Neely (2013) to describe how major central banks have evolved unconventional monetary policies to encourage real activity and maintain stable inflation rates from 2013 through 2019. By 2013, central banks were moving from lump-sum asset purchase programs to continuing asset purchase programs, which are conditioned on economic conditions, careful communication strategies, bank lending programs with incentives and negative interest rates. This article reviews how central banks tailored their unconventional monetary methods to their various challenges and the structures of their respective economies.

Download or read book The Lessons from QE and Other unconventional Monetary Policies Evidence from the Bank of England written by Victor Lyonnet and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Microeconomics of Banking written by Xavier Freixas and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The third edition of an essential text on the microeconomic foundations of banking that surveys the latest research in banking theory, with new material that covers recent developments in the field"--

Download or read book The Oxford Handbook of the Economics of Central Banking written by David G. Mayes and published by Oxford University Press. This book was released on 2019-02-15 with total page 809 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economic influence of central banks has received ever more attention given their centrality during the financial crises that led to the Great Recession, strains in the European Union, and the challenges to the Euro. The Oxford Handbook of the Economics of Central Banking reflects the state of the art in the theory and practice and covers a wide range of topics that will provide insight to students, scholars, and practitioners. As an up to date reference of the current and potential challenges faced by central banks in the conduct of monetary policy and in the search for the maintenance of financial system stability, this Oxford Handbook covers a wide range of essential issues. The first section provides insights into central bank governance, the differing degrees of central bank independence, and the internal dynamics of their decision making. The next section focuses on questions of whether central banks can ameliorate fiscal burdens, various strategies to affect monetary policy, and how the global financial crisis affected the relationship between the traditional focus on inflation targeting and unconventional policy instruments such as quantitative easing (QE), foreign exchange market interventions, negative interest rates, and forward guidance. The next two sections turn to central bank communications and management of expectations and then mechanisms of policy transmission. The fifth part explores the challenges of recent developments in the economy and debates about the roles central banks should play, focusing on micro- and macro-prudential arguments. The implications of recent developments for policy modeling are covered in the last section. The breadth and depth enhances understanding of the challenges and opportunities facing central banks.

Download or read book Should Unconventional Monetary Policies Become Conventional written by Dominic Quint and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The large recession that followed the Global Financial Crisis of 2008-09 triggered unprecedented monetary policy easing around the world. Most central banks in advanced economies deployed new instruments to affect credit conditions and to provide liquidity on a large scale after short-term policy rates had reached their effective lower bound. In this paper, we study if this new set of tools, commonly labeled as unconventional monetary policies (UMP), should continue to be used once economic conditions and interest rates have normalized. In particular, we study the optimality of asset purchase programs by using an estimated non-linear DSGE model with a banking sector and long-term private and public debt for the United States. We find that the benefits of using such UMP in normal times are substantial, equivalent to 1.45 percent of consumption. However, the benefits of using UMP are shock-dependent and mostly arise when the economy is hit by financial shocks. By contrast, when more traditional business cycle shocks (such as supply and demand shocks) hit the economy, the benefits of using UMP are negligible or zero.

Download or read book Managing the Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Download or read book Unconventional Central Bank Measures for Emerging Economies written by Mr.Etienne B. Yehoue and published by International Monetary Fund. This book was released on 2009-10-01 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional central bank measures are playing a key policy role for many advanced economies in the 2007-09 global crisis. Are they playing a similar role for emerging economies? Emerging economies have widely used unconventional foreign exchange and domestic short-term liquidity easing measures. Their use of credit easing and quantitative easing measures has been much more limited. Thus, unconventional measures are much less important for emerging economies compared to advanced economies in achieving broader macroeconomic objectives. The difference can be attributed to the relatively limited financial stress in emerging economies, their external vulnerabilities and their limited scope for quasifiscal activities.

Download or read book Essays in Banking and Monetary Policy written by Koji Takahashi and published by . This book was released on 2017 with total page 177 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 examines the effects of bank-driven terminations of bank-borrower relationships on the borrowers' investments by exploiting a matched dataset of Japanese banks and firms. I find that bank-driven terminations significantly decrease investment when the firms facing termination have difficulty in either establishing new relationships or increasing borrowings within their existing relationships. Such termination effects are larger than those due to credit reduction within continuing relationships and are more pronounced for smaller firms. Our findings coincide with previous literature emphasizing financial frictions in the matching process and the importance of relation-specific assets in credit markets. Chapter 2 investigates the effects of unconventional monetary policy on bank lending, using a bank-firm matched dataset in Japan from 1999 to 2015 by disentangling conventional and unconventional monetary policy shocks employed by the Bank of Japan over the past 15 years. I find that a rise in the share of the unconventional assets held by the Bank of Japan boosts lending to firms with a lower distance-to-default ratio from banks with a lower liquid assets ratio and higher risk appetite. In contrast to the composition shock, the monetary base shock of increasing the Bank of Japan's balance sheet size does not have heterogeneous effects on bank lending. Furthermore, we find that interest rate cuts stimulate lending to risky firms from banks with a higher leverage ratio. Chapter 3 contributes to the debate about the the effect of bank loan supply shocks on real economy, using bank lending stance shocks derived from the industry-level Short-term Economic Survey of Enterprises (Tankan) survey data in Japan. The identified bank lending stance shocks enable us to investigate the effect of loan supply shocks on the real economy over the past 30 years in a consistent manner using a structural vector auto regressive model, thereby leading to three main conclusions. First, a negative bank loan supply shock, which means a tightening of banks' lending stance, significantly decreases real GDP growth rates. However, loan supply shocks were not main driving factors for fluctuations of the real economy; the contribution of bank loan supply shocks to GDP is less than 10%. Third, I find that the economy with a zero lower bound constraint is more vulnerable to an adverse loan supply shock compared to that without the constraint as predicted by existing theoretical models. In a zero lower bound environment, loan supply shocks contribute to approximately 10% of the GDP fluctuations.

Download or read book Negative Interest Rates written by Luís Brandão Marques and published by International Monetary Fund. This book was released on 2021-03-03 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.

Download or read book Bank Profitability and Risk Taking written by Natalya Martynova and published by International Monetary Fund. This book was released on 2015-11-25 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.

Download or read book Macro financial Linkages and the Role of Unconventional Monetary and Macroprudential Policy written by Kristina Bluwstein and published by . This book was released on 2017 with total page 121 pages. Available in PDF, EPUB and Kindle. Book excerpt: In most macroeconomic models prices for consumption goods are competitive and consumers are treated as price-takers, which gives rise to the law of one price. However, as the empirical literature documents, prices for the same products are substantially dispersed. The consumers facing the price heterogeneity can affect the effective prices they pay by employing different shopping strategies. In this thesis, I investigate whether price dispersion matters for shaping macroeconomic aggregates. In chapter 1, I study how income fluctuations are transmitted to consumption decisions in the presence of price dispersion. To this end, I propose a novel and tractable framework to study search for consumption as part of the optimal savings problem. The search protocol can be easily embedded into a standard incomplete-market model. As I show, frictions in the purchasing technology generate important macroeconomic implications for modeling inequality and, in general, household consumption. In economies with those frictions, consumers feature smoother consumption responses to income shocks and the level of wealth inequality is amplified. In chapter 2, I study equilibrium properties of a standard model of endogenous price distribution by Burdett and Judd (1983). In search economies of this type in most cases there are multiple equilibria. I show that only some allocations can be characterized as stable equilibria. Next, I propose a modification of the original model, which gives rise to one unique symmetric dispersed equilibrium, that can be used for characterizing every feasible allocation. Finally, in chapter 3, I use the framework from chapter 1 to study the redistributive function of monetary policy. I show that money injection to households might reduce the inefficiency generated by non-competitive behavior of firms thanks to an increase in consumption purchased by bargain hunters. This results in the reduction of the monopolistic power of firms and lower consumption real prices.

Download or read book Does the Fed s Unconventional Monetary Policy Weaken the Link Between the Financial and the Real Sector written by Yimin Xu and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: