Template-Type: ReDIF-Paper 1.0
Title: Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area
Author-Name: Christian Bittner
Author-Email: 
Author-Name: Alexander Rodnyansky
Author-Email: 
Author-Name: Farzad Saidi
Author-Email:
Author-Name: Yannick Timmer
Author-Email:

Classification-JEL: E44, E52, E58, E63, F45, G20, G21
Keywords: Negative Interest Rates, Quantitative Easing, Unconventional Monetary Policy, Bank
Lending Channel

Abstract: We study the interaction of expansionary rate-based monetary policy and quantitative
easing, despite their concurrent implementation, by exploiting heterogeneous
banks and the introduction of negative monetary-policy rates in a fragmented
euro area. Quantitative easing increases credit supply less, translating into weaker
employment growth, when banks’ funding costs do not decrease. Using administrative
data from Germany, we uncover that among banks selling their securities,
central-bank reserves remain disproportionately with high-deposit banks that are
constrained due to sticky customer deposits at the zero lower bound. Affected German
banks lend relatively less to firms while increasing their interbank exposure in
the euro area.

Note: 
Length: 69
Creation-Date: 2024-05
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp552
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_552