The Effects of Unconventional Monetary Policies on Bank Soundness

August 13, 2014

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Format: Chicago

Frederic Lambert, and Kenichi Ueda. The Effects of Unconventional Monetary Policies on Bank Soundness, (USA: International Monetary Fund, 2014) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Unconventional monetary policy is often assumed to benefit banks. However, we find little supporting evidence. Rather, we find some evidence for heightened medium-term risks. First, in an event study using a novel instrument for monetary policy surprises, we do not detect clear effects of monetary easing on bank stock valuation but find a deterioration of medium-term bank credit risk in the United States, the euro area, and the United Kingdom. Second, in panel regressions using U.S. banks’ balance sheet information, we show that bank profitability and risk taking are ambiguously affected, while balance sheet repair is delayed.

Subject: Banking, Bond yields, Central bank policy rate, Financial institutions, Financial services, Monetary policy, Stocks, Unconventional monetary policies, Yield curve

Keywords: B. bank risk-taking, Balance Sheet Repair, Bank CDS spread, Bank Profitability, Bank Risk, Bank size, Bond yields, CDS spread, Central bank policy rate, Equity ratio, Fed funds rate, Futures contract, Global, Monetary Policy, Monetary policy announcement, Panel regression, Return on assets, Short-term debt, Stocks, Taylor gap, Unconventional monetary policies, WP, Yield curve

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/152
Stock No:

WPIEA2014152
ISBN:

9781498363563
ISSN:

1018-5941

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