Quantitative easing and Japanese bank equity values

Quantitative Easing and Financial Stability∗

The massive expansion of central-bank balance sheets in response to recent crises raises important questions about the effects of such “quantitative easing” policies, both their effects on financial conditions and on aggregate demand (the intended effects of the policies), and their possible collateral effects on financial stability. The present paper compares three alternative dimensions of ce...

When and How To Exit Quantitative Easing?

S ince the onset of the financial crisis in late 2007, the Federal Reserve has injected an astronomical amount of money into the economy through its large-scale asset purchase (LSAP) programs. According to former Fed Chairman Ben Bernanke (2009, p. 5), the essence of LSAP is “credit easing” (CE)—that is, reducing the cost of private borrowing by direct purchases of privately issued debt instead...

Countercyclical Bank Equity Issuance∗

It is well established that equity issuance for most non-financial firms is procyclical. This paper shows that, in contrast, equity issuance for banks is countercyclical across credit cycles after 1980, as is retained income. Thus, during credit booms, banks raise less equity, even though more equity might help banks better absorb shocks. This paper shows that government guarantees play a cruci...

Bank equity involvement in industrial firms and bank risk

The regulatory framework in Europe does not prevent banks from taking large or controlling equity stakes in non-financial firms, potentially contributing to higher levels of bank risk and financial instability. Using a panel of European commercial banks for the period 2004-2008, we find that higher levels of equity positions in industrial firms and higher proportions of industrial firms where t...

The Macroeconomic Effects of Quantitative Easing