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QE and the bank lending channel in the United Kingdom

Butt, Nick, Churm, Rohan, McMahon, Michael, Morotz, Arpad and Schanz, Jochen (2015) QE and the bank lending channel in the United Kingdom. CFM discussion paper series (CFM-DP2015-23). Centre For Macroeconomics, London, UK.

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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.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2015 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 14 Dec 2017 10:02
Last Modified: 04 Jul 2019 23:26
URI: http://eprints.lse.ac.uk/id/eprint/86286

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