Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215460
Authors: 
Caballero, Diego
Lucas, André
Schwaab, Bernd
Zhang, Xin
Year of Publication: 
2019
Series/Report no.: 
Sveriges Riksbank Working Paper Series 382
Abstract: 
To what extent can a central bank influence its own balance sheet credit risks during a financial crisis through unconventional monetary policy operations? To study this question we develop a risk measurement framework to infer the time-variation in portfolio credit risks at a high (weekly) frequency. Focusing on the Eurosystem's experience during the euro area sovereign debt crisis between 2010 and 2012, we find that the announcement and implementation of unconventional monetary policy operations generated beneficial risk spill-overs across policy portfolios. This caused overall risk to be nonlinear in exposures. In some instances the Eurosystem reduced its overall balance sheet credit risk by doing more, in line with Bagehot's well-known assertion that occasionally "only the brave plan is the safe plan."
Subjects: 
lender-of-last-resort
unconventional monetary policy
portfolio creditrisk
longer-term operational framework
central bank communication
JEL: 
G21
C33
Document Type: 
Working Paper

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