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QE and the Bank Lending Channel in the United Kingdom

Author

Listed:
  • Nick Butt

    (Bank of England)

  • Rohan Churm

    (Bank of England)

  • Michael McMahon

    (Centre For Economic Policy Research
    Centre For Macroeconomics (CFM)
    University of Warwick)

  • Arpad Morotz

    (Bank of England)

  • Jochen Schanz

    (Bank for International Settlements)

Abstract

We test whether quantitative easing (QE), in addition to boosting aggregate demand and inflation via portfolio rebalancing channels, operated through a bank lending channel (BLC) in the UK. Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE. We show, in a simple framework, that the traditional BLC is diminished if the bank receives `flighty' deposits (deposits that are likely to quickly leave the bank). We show that QE gave rise to such flighty deposits which may explain why we find no evidence of a BLC.

Suggested Citation

  • Nick Butt & Rohan Churm & Michael McMahon & Arpad Morotz & Jochen Schanz, 2015. "QE and the Bank Lending Channel in the United Kingdom," Discussion Papers 1523, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:1523
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    More about this item

    Keywords

    Monetary Policy; Bank Lending Channel; Quantative Easing;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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