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Macroprudential Regulation, Quantitative Easing, and Bank Lending

Author

Listed:
  • Andrea Orame
  • Rodney Ramcharan
  • Roberto Robatto

Abstract

We show that widely used macroprudential regulations that rely on historical cost accounting (HCA) to insulate banks’ balance sheets from financial market volatility significantly affect the transmission of monetary policy onto bank lending. Using detailed supervisory data from Italian banks, we find that HCA mutes the transmission of quantitative easing and other monetary policies that affect the long end of the yield curve, weakening the effectiveness of interventions aimed at reducing firm credit constraints. We suggest alternative policies that have the benefits of HCA but allow monetary policy to pass through.

Suggested Citation

  • Andrea Orame & Rodney Ramcharan & Roberto Robatto, 2025. "Macroprudential Regulation, Quantitative Easing, and Bank Lending," The Review of Financial Studies, Society for Financial Studies, vol. 38(5), pages 1545-1593.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:5:p:1545-1593.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae085
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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