Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146907
Authors: 
Kühl, Michael
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 38/2016
Abstract: 
This paper investigates how government bond purchases affect leverage-constrained banks and non-financial firms by utilising a stochastic general equilibrium model. My results indicate that government bond purchases not only reduce non-financial firms' borrowing costs, amplified through a reduction in expected defaults, but also lower banks' profit margins. In an economy in which loans priced at par dominate in banks' balance sheets - as a reflection of the euro area's structure - the leverage constraint of non-financial firms is relaxed while that of banks tightens. I show that the leverage constraint in the non-financial sector plays an essential role in transmitting the impulses of government bond purchases to the real economy.
Subjects: 
DSGE Model
Financial Frictions
Banking Sector
Portfolio Rebalancing Channel
Government Bond Purchases
JEL: 
E44
E58
E61
ISBN: 
978-3-95729-304-6
Document Type: 
Working Paper

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