QE and the Bank Lending Channel in the United Kingdom

Michael McMahon, Arpad Morotz, Nicholas Butt, Jochen Schanz and Rohan Churm

No 10875, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We test whether quantitative easing (QE), in addition to boosting aggregate demand and inflation via portfolio rebalancing channels, operated through a bank lending channel (BLC) in the UK. Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE. We show, in a simple framework, that the traditional BLC is diminished if the bank receives 'flighty' deposits (deposits that are likely to quickly leave the bank). We show that QE gave rise to such flighty deposits which may explain why we find no evidence of a BLC.

Keywords: Bank lending channel; Monetary policy; Quantitative easing (search for similar items in EconPapers)
JEL-codes: E51 E52 G20 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the bank lending channel in the United Kingdom (2015)
Working Paper: QE and the Bank Lending Channel in the United Kingdom (2015)
Working Paper: QE and the bank lending channel in the United Kingdom (2014)
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