Quantitative Easing and Excess Reserves

Valentin Jouvanceau

No 1910, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: What are the impacts of a flush of interest-bearing excess reserves to the real economy? Surprisingly, the theoretical literature remains silent about this question. We address this issue in a new Keynesian model with various financial frictions and reserve requirements in the balance sheet of bankers. Modeling QE by the supply of excess reserves, allow for endogenous changes in the relative supply of financial assets. We find that this mechanism is crucial to identify and disentangle between the portfolio balance, the credit and the asset prices channels of QE. Further, we demonstrate that the macroeconomic effects of QE are rather weak and mainly transmitted through the asset prices channel.

Keywords: Quantitative Easing; Excess Reserves; Transmission Channels; Securitization Crisis (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 E58 G01 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Quantitative Easing and Excess Reserves (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1910

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