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A Note of Caution on Quantifying Banks' Recapitalization Effects

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  • KIRSTEN SCHMIDT
  • FELIX NOTH
  • LENA TONZER

Abstract

Unconventional monetary policy measures like asset purchase programs aim to reduce certain securities' yield and alter financial institutions' investment behavior. These measures increase the institutions' market value of securities and add to their equity positions. We show that the extent of this recapitalization effect crucially depends on the securities' accounting and valuation methods, country‐level regulation, and maturity structure. We argue that future research needs to consider these factors when quantifying banks' recapitalization effects and consequent changes in banks' lending decisions to the real sector.

Suggested Citation

  • Kirsten Schmidt & Felix Noth & Lena Tonzer, 2022. "A Note of Caution on Quantifying Banks' Recapitalization Effects," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(4), pages 1123-1133, June.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:4:p:1123-1133
    DOI: 10.1111/jmcb.12893
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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