A Note of Caution on Quantifying Banks' Recapitalization Effects

1 Pages Posted: 10 Feb 2021

See all articles by Kirsten Schmidt

Kirsten Schmidt

Halle Institute for Economic Research

Felix Noth

Otto-von-Guericke-Universität Magdeburg; Halle Institute for Economic Research

Lena Tonzer

Halle Institute for Economic Research

Date Written: 2021

Abstract

Unconventional monetary policy measures like asset purchase programs aim to reduce certain securities' yield and alter financial institutions' investment behavior. These measures increase the institutions' market value of securities and add to their equity positions. We show that the extent of this recapitalization effect crucially depends on the securities' accounting and valuation methods, country-level regulation, and maturity structure. We argue that future research needs to consider these factors when quantifying banks' recapitalization effects and consequent changes in banks' lending decisions to the real sector.

JEL Classification: G21, G28, E52, E58

Suggested Citation

Schmidt, Kirsten and Noth, Felix and Tonzer, Lena, A Note of Caution on Quantifying Banks' Recapitalization Effects (2021). Deutsche Bundesbank Discussion Paper No. 02/2021, Available at SSRN: https://ssrn.com/abstract=3782959

Kirsten Schmidt (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Felix Noth

Otto-von-Guericke-Universität Magdeburg ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

Halle Institute for Economic Research

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
Halle, 06108
Germany

HOME PAGE: http://www.iwh-halle.de/asp/person.asp?fnh&Lang=e&Abteilung=fin

Lena Tonzer

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

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