Macroprudential Regulation, Quantitative Easing, and Bank Lending

110 Pages Posted: 15 Mar 2021 Last revised: 18 Jun 2024

See all articles by Andrea Orame

Andrea Orame

Bank of Italy

Rodney Ramcharan

University of Southern California, Marshall School of Business

Roberto Robatto

University of Wisconsin - Madison

Multiple version iconThere are 2 versions of this paper

Date Written: June 18, 2024

Abstract

We show that widely used macroprudential regulations that rely on historical cost accounting (HCA)-to insulate banks' balance sheets from financial market volatility-significantly affect the transmission of monetary policy onto bank lending. Using detailed supervisory data from Italian banks, we find that HCA mutes the transmission of quantitative easing and other monetary policies that affect the long end of the yield curve, weakening the effectiveness of interventions aimed at reducing firm credit constraints. We suggest alternative policies that have the benefits of HCA but allow monetary policy to pass through.

Keywords: Sovereign assets, macroprudential regulation, monetary policy, credit crunches

JEL Classification: G21, G28, E52, E58

Suggested Citation

Orame, Andrea and Ramcharan, Rodney and Robatto, Roberto, Macroprudential Regulation, Quantitative Easing, and Bank Lending (June 18, 2024). Available at SSRN: https://ssrn.com/abstract=3802634 or http://dx.doi.org/10.2139/ssrn.3802634

Andrea Orame

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

HOME PAGE: http://andreaorame.github.io/

Rodney Ramcharan

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

Roberto Robatto (Contact Author)

University of Wisconsin - Madison ( email )

975 University Avenue
Madison, WI 53706
United States

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