Download This PaperThe Asset Reallocation Channel of Quantitative Easing. The Case of the UK
73 Pages Posted: 4 Sep 2019 Last revised: 23 Sep 2022
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The Asset Reallocation Channel of Quantitative Easing. The Case of the UK
Does Quantitative Easing Boost Bank Lending to the Real Economy or Cause Other Bank Asset Reallocation? The Case of the UK
Date Written: August 3, 2022
Abstract
We investigate the impact of the Bank of England’s asset purchase program (APP) on the composition of assets of UK banks with unique data on the received reserves injections. Compared to the control group, receiving banks reallocated their assets towards lower riskweighted investments, such as government securities, but did not supply more credit to the real economy. Overall, our findings suggest that risk-based capital constraints can limit the effectiveness of expansionary unconventional monetary policies and provide incentives for carry trade activities when banks are not adequately capitalised.
Keywords: Finance, monetary policy, quantitative easing, bank lending.
JEL Classification: E51, G21
Suggested Citation: Suggested Citation
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland