A Note of Caution on Quantifying Banks' Recapitalization Effects

Kirsten Schmidt, Felix Noth*, Lena Tonzer

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Unconventional monetary policy measures like asset purchase programs aim to reduce certain securities' yield and alter financial institutions' investment behavior. These measures increase the institutions' market value of securities and add to their equity positions. We show that the extent of this recapitalization effect crucially depends on the securities' accounting and valuation methods, country-level regulation, and maturity structure. We argue that future research needs to consider these factors when quantifying banks' recapitalization effects and consequent changes in banks' lending decisions to the real sector.

Original languageEnglish
JournalJournal of Money, Credit and Banking
DOIs
Publication statusAccepted/In press - 2021

Bibliographical note

Publisher Copyright:
© 2021 The Authors. Journal of Money, Credit and Banking published by Wiley Periodicals LLC on behalf of Ohio State University

Keywords

  • capital regulation
  • security valuation
  • unconventional monetary policy

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