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Effects of Unconventional Monetary Policy on Financial Institutions

Effects of Unconventional Monetary Policy on Financial Institutions
Author: Gabriel Chodorow-Reich
Publisher:
Total Pages: 57
Release: 2014
Genre: Economics
ISBN:

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Monetary policy affects the real economy in part through its effects on financial institutions. High frequency event studies show the introduction of unconventional monetary policy in the winter of 2008-09 had a strong, beneficial impact on banks and especially on life insurance companies. I interpret the positive effects on life insurers as expansionary policy recapitalizing the sector by raising the value of legacy assets. Expansionary policy had small positive or neutral effects on banks and life insurers through 2013. The interaction of low nominal interest rates and administrative costs forced money market funds to waive fees, producing a possible incentive to reach for yield to reduce waivers. I show money market funds with higher costs reached for higher returns in 2009-11, but not thereafter. Some private defined benefit pension funds increased their risk taking beginning in 2009, but again such behavior largely dissipated by 2012. In sum, unconventional monetary policy helped to stabilize some sectors and provoked modest additional risk taking in others. I do not find evidence that the financial institutions studied formented a tradeoff between expansionary policy and financial stability at the end of 2013.


Macroeconomic Shocks and Unconventional Monetary Policy

Macroeconomic Shocks and Unconventional Monetary Policy
Author: Naoyuki Yoshino
Publisher: Oxford University Press, USA
Total Pages: 345
Release: 2019
Genre: Business & Economics
ISBN: 0198838107

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Barely two decades after the Asian financial crisis Asia was suddenly confronted with multiple challenges originating outside the region: the 2008 global financial crisis, the European debt crisis, and finally developed economies' implementation of unconventional monetary policies. The implementation of quantitative easing, ultra-low interest rate policies, and negative interest rate policies by a number of large central banks has given rise to concerns over financial stability and international capital flows. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets explains how shocks stemming from the global financial crisis have affected macroeconomic and financial stability in emerging Asia. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets brings together the most up-to-date knowledge impacts of recent macroeconomic shocks on Asia's real economy; the spillover effects of macroeconomic shocks on financial markets and flows in Asia; and key challenges for monetary, exchange rate, trade and macro prudential policies of developing Asian economies. It is authored by experts in the field of international macroeconomics from leading academic institutions, central banks, and international organizations including the International Monetary Fund, the Bank for International Settlement, and the Asian Development Bank Institute.


The Effects of Unconventional Monetary Policies on Bank Soundness

The Effects of Unconventional Monetary Policies on Bank Soundness
Author: Frederic Lambert
Publisher: International Monetary Fund
Total Pages: 40
Release: 2014-08-13
Genre: Business & Economics
ISBN: 1498363563

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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.


Man Out

Man Out
Author: Andrew L. Yarrow
Publisher: Brookings Institution Press
Total Pages: 340
Release: 2018-09-11
Genre: Political Science
ISBN: 0815732759

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The story of men who are hurting—and hurting America by their absence Man Out describes the millions of men on the sidelines of life in the United States. Many of them have been pushed out of the mainstream because of an economy and society where the odds are stacked against them; others have chosen to be on the outskirts of twenty-first-century America. These men are disconnected from work, personal relationships, family and children, and civic and community life. They may be angry at government, employers, women, and "the system" in general—and millions of them have done time in prison and have cast aside many social norms. Sadly, too many of these men are unsure what it means to be a man in contemporary society. Wives or partners reject them; children are estranged from them; and family, friends, and neighbors are embarrassed by them. Many have disappeared into a netherworld of drugs, alcohol, poor health, loneliness, misogyny, economic insecurity, online gaming, pornography, other off-the-grid corners of the internet, and a fantasy world of starting their own business or even writing the Great American novel. Most of the men described in this book are poorly educated, with low incomes and often with very few prospects for rewarding employment. They are also disproportionately found among millennials, those over 50, and African American men. Increasingly, however, these lost men are discovered even in tony suburbs and throughout the nation. It is a myth that men on the outer corners of society are only lower-middle-class white men dislocated by technology and globalization. Unlike those who primarily blame an unjust economy, government policies, or a culture sanctioning "laziness," Man Out explores the complex interplay between economics and culture. It rejects the politically charged dichotomy of seeing such men as either victims or culprits. These men are hurting, and in turn they are hurting families and hurting America. It is essential to address their problems. Man Out draws on a wide range of data and existing research as well as interviews with several hundred men, women, and a wide variety of economists and other social scientists, social service providers and physicians, and with employers, through a national online survey and in-depth fieldwork in several communities.


The Impact of Unconventional Monetary Policy on Financial Markets, Credit Markets and Financial Stability

The Impact of Unconventional Monetary Policy on Financial Markets, Credit Markets and Financial Stability
Author: Genèvre Covindassamy
Publisher:
Total Pages: 264
Release: 2017
Genre: Economic stabilization
ISBN: 9781369716351

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In response to the 2008 financial crisis, the Federal Reserve initially responded using the federal funds rate. However, by December 2008 it had reached the zero lower bound (ZLB). With economic conditions still deteriorating the Federal Reserve used unconventional monetary policy actions in the form of Large-Scale Asset Purchases (LSAPs) to lower a range of long-term interest rates. The intention was to stimulate economic activity and promote recovery. The purpose of this dissertation is to analyze the effects of LSAPs from three perspectives. In the first chapter we find that LSAPs had a positive effect on the stock prices of some financial sectors. However, the effects were not as statistically significant for nonfinancial sectors. In the second chapter, we find that LSAPs helped the consumer and mortgage credit markets but not business credit. Overall the effects were weak. In the third chapter, we document the change in the Federal Reserve and banks' balance sheets as a result of LSAPs. It is clear that most of the liquidity injections remained as excess reserves, though we show an upper bound on how much of these injections went into new loans and deposits relative to cash or excess reserves. We discuss alternative ways that LSAPs could have mattered, such as through rebuilding bank balance sheets. Even though the liquidity injections may not be able to stimulate economic recovery they may help rebuilt and strengthen financial institutions. Restoring financial stability is beneficial to avoid a complete collapse of systemically important financial institutions.


The Impact of Unconventional Monetary Policy Measures by the Systemic Four on Global Liquidity and Monetary Conditions

The Impact of Unconventional Monetary Policy Measures by the Systemic Four on Global Liquidity and Monetary Conditions
Author: Ms.Yevgeniya Korniyenko
Publisher: International Monetary Fund
Total Pages: 48
Release: 2015-12-30
Genre: Business & Economics
ISBN: 1513515020

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The paper examines the impact of unconventional monetary policy measures (UMPMs) implemented since 2008 in the United States, the United Kingdom, Euro area and Japan— the Systemic Four—on global monetary and liquidity conditions. Overall, the results show positive significant relationships. However, there are differences in the impact of the UMPMs of individual S4 countries on these conditions in other countries. UMPMs of the Bank of Japan have positive association with global liquidity but negative association with securities issuance. The quantitative easing (QE) of the Bank of England has the opposite association. Results for the quantitative easing measures of the United States Federal Reserve System (U.S. Fed) and the ECB UMPMs are more mixed.


Global Impact and Challenges of Unconventional Monetary Policies

Global Impact and Challenges of Unconventional Monetary Policies
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
Total Pages: 40
Release: 2013-03-09
Genre: Business & Economics
ISBN: 149834139X

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This paper takes stock of unconventional monetary policies (UMP) and their impact so far, and looks ahead towards exit and prospects for policy coordination. It synthesizes earlier staff work on UMP,1 the findings of a substantial and growing academic and central banking literature, as well as further staff analysis contained in the Background Paper. While some widely accepted conclusions have emerged from the large and growing number of studies on UMP, many important questions remain unsettled, as enough time has not elapsed to draw definitive conclusions. In those cases, the paper will pose the relevant questions and provide possible nswers, while recognizing the uncertainty that remains.


Introduction to Central Banking

Introduction to Central Banking
Author: Ulrich Bindseil
Publisher: Springer Nature
Total Pages: 128
Release: 2021-05-18
Genre: Business & Economics
ISBN: 3030708845

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This open access book gives a concise introduction to the practical implementation of monetary policy by modern central banks. It describes the conventional instruments used in advanced economies and the unconventional instruments that have been widely adopted since the financial crisis of 2007–2008. Illuminating the role of central banks in ensuring financial stability and as last resort lenders, it also offers an overview of the international monetary framework. A flow-of-funds framework is used throughout to capture this essential dimension in a consistent and unifying manner, providing a unique and accessible resource on central banking and monetary policy, and its integration with financial stability. Addressed to professionals as well as bachelors and masters students of economics, this book is suitable for a course on economic policy. Useful prerequisites include at least a general idea of the economic institutions of an economy, and knowledge of macroeconomics and monetary economics, but readers need not be familiar with any specific macroeconomic models.


Unintended Side Effects of Unconventional Monetary Policy

Unintended Side Effects of Unconventional Monetary Policy
Author: Tobias Berg
Publisher:
Total Pages:
Release: 2022
Genre:
ISBN:

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Using granular supervisory data from Germany, we investigate the impact of unconventional monetary policies via central banks' purchase of corporate bonds. While this policy results in a loosening of credit market conditions as intended by policy makers, we document two unintended side effects. First, banks that are more exposed to borrowers benefiting from the bond purchases now lend more to high-risk firms with no access to bond markets. Since more loan write-offs arise from these firms and banks are not compensated for this risk by higher interest rates, we document a drop in bank profitability. Second, the policy impacts the allocation of loans among industries. Affected banks reallocate loans from investment grade firms active on bond markets to mainly real estate firms without investment grade rating. Overall, our findings suggest that central banks' quantitative easing via the corporate bond markets has the potential to contribute to both banking sector instability and real estate bubbles.


Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data

Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data
Author: Margherita Bottero
Publisher: International Monetary Fund
Total Pages: 59
Release: 2019-02-28
Genre: Business & Economics
ISBN: 1498300855

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We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.