QE and the Bank Lending Channel in the United Kingdom

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.


Issue Date:
Oct 10 2015
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/270021
Language:
English
Total Pages:
40
JEL Codes:
E51; E52; G20
Series Statement:
WERP 1073




 Record created 2018-03-27, last modified 2018-03-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)