The Effects of Quantitative Easing on Bank Lending Behavior

Review of Financial Studies (Forthcoming)

44 Pages Posted: 5 Oct 2015 Last revised: 13 Jun 2017

See all articles by Alexander Rodnyansky

Alexander Rodnyansky

University of Cambridge - Faculty of Economics

Olivier Darmouni

Columbia University - Columbia Business School

Date Written: June 12, 2017

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.

Keywords: Unconventional monetary policy, quantitative easing, bank lending, mortgage-backed securities

JEL Classification: E44, E52, G21

Suggested Citation

Rodnyansky, Alexander and Darmouni, Olivier, The Effects of Quantitative Easing on Bank Lending Behavior (June 12, 2017). Review of Financial Studies (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2669009 or http://dx.doi.org/10.2139/ssrn.2669009

Alexander Rodnyansky (Contact Author)

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

HOME PAGE: http://www.arodnyansky.com

Olivier Darmouni

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1,209
rank
15,115
Abstract Views
3,466
PlumX Metrics