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The Portfolio Rebalancing Channel of Quantitative Easing

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  • Valentin Jouvanceau

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes the portfolio rebalancing channel of Quantitative Easing (QE hereafter) interventions. First, we identify the effects of a QE shock using a Bayesian VAR on US data using a sign and zero restrictions identification scheme. We find that QE shocks have substantial effects on corporate spreads with different ratings, supportive of a portfolio rebalancing channel. Second, we build a DSGE model with a securitzation mechanism. We confront the resulting impulse response functions to those uncovered by our VAR analysis, and find a fairly good match. Finally, we show that the portfolio rebalancing channel crucially affects the transmission of QE shocks to real economy.

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  • Valentin Jouvanceau, 2016. "The Portfolio Rebalancing Channel of Quantitative Easing," Working Papers halshs-01349870, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01349870
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01349870
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    Cited by:

    1. Paludkiewicz, Karol, 2018. "Unconventional Monetary Policy, Bank Lending, and Security Holdings: The Yield-Induced Portfolio Rebalancing Channel," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181669, Verein für Socialpolitik / German Economic Association.
    2. Tischer, Johannes, 2018. "Quantitative easing, portfolio rebalancing and credit growth: Micro evidence from Germany," Discussion Papers 20/2018, Deutsche Bundesbank.

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    More about this item

    Keywords

    Quantitative easing; securitization; financial intermediation; portfolio rebalancing channel;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G2 - Financial Economics - - Financial Institutions and Services

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