Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195188
Authors: 
Acharya, Viral V.
Imbierowicz, Björn
Steffen, Sascha
Teichmann, Daniel
Year of Publication: 
2019
Series/Report no.: 
CFS Working Paper Series 620
Abstract: 
We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the January 2006 to June 2010 period. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks, even as it lowers deposit rates for both high-risk and low-risk banks. This adversely affects the balance sheets of high-risk bank borrowers, leading to lower payouts, lower capital expenditures, and lower employment. Overall, our results suggest that banks' capital constraints at the time of an easing of monetary policy pose a challenge to the effectiveness of the bank lending channel and the effectiveness of the central bank as a lender of last resort.
Subjects: 
Central bank liquidity
Monetary policy transmission
Corporate deposits
Financial crisis
Lender of last resort
Banking crisis
Loans
Real effects
JEL: 
E43
E58
G01
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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