Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208360
Authors: 
de Haan, Leo
Holton, Sarah
van den End, Jan-Willem
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper 2326
Abstract: 
We empirically analyse the relationship between longer term central bank liquidity support and banks' balance sheet ratios, using difference-in-differences panel regressions and propensity score matching on a large sample of banks in the euro area. The research question is whether the liquidity operations, which were introduced to prevent disorderly deleveraging, can also be linked to unintended changes in banks' funding policies and asset allocations. The results show that unconditional and conditional refinancing operations are associated with different developments on banks' balance sheets. Unconditional longer-term refinancing operations went together with higher maturity transformation by banks in stressed countries, and also more carry trades, i.e. banks borrowing more while increasing their holdings of government bonds. In contrast, refinancing operations that were conditional on banks' lending were not associated with such carry trades, highlighting the benefits of conditionality attached to long-term refinancing operations.
Subjects: 
central bank liquidity
banking
financial intermediation
JEL: 
E51
G21
G32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3895-2
Document Type: 
Working Paper
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