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Employment effects of unconventional monetary policy: Evidence from QE

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  • Luck, Stephan
  • Zimmermann, Tom

Abstract

This paper investigates employment effects of the Federal Reserve’s quantitative easing policies (QE) via a bank lending channel. We find that banks with higher mortgage-backed securities holdings refinanced relatively more mortgages after the first round of QE, which increased local consumption and employment in the nontradable goods sector. In contrast, banks increased lending to firms and home purchase mortgage origination after the third round of QE, which led to a sizable increase in overall employment. Our findings are supported by new confidential loan-level data that show firms with stronger ties to affected banks increased employment and capital investment more during QE3.

Suggested Citation

  • Luck, Stephan & Zimmermann, Tom, 2020. "Employment effects of unconventional monetary policy: Evidence from QE," Journal of Financial Economics, Elsevier, vol. 135(3), pages 678-703.
    • Handle: RePEc:eee:jfinec:v:135:y:2020:i:3:p:678-703
    DOI: 10.1016/j.jfineco.2019.07.004
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    More about this item

    Keywords

    Bank lending channel; Quantitative easing;

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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