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Liquidity management at the zero lower bound and an era of activism in central banking

  • The paper studies liquidity management in the banking sector at the zero lower bound implemented by central banks. The new era of monetary policy with interest rates at zero and quantitative easing programs raise questions about the effectiveness of central banking policy and their impact on the banking sector. I find that the zero lower bound reduces liquidity reserves of banks and thus creates less credit supply. The T-LTRO program, developed by the European Central Bank, has helped to tackle this problem. However, the recently expanded asset purchase program reveals the opposite effect. Hence, the recent liquidity provisions by central banks have put incentives rather on de-leveraging than bank lending.

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Metadaten
Name:Herzog, Bodo
URN:urn:nbn:de:bsz:rt2-opus4-11122
DOI:https://doi.org/10.4236/jmf.2016.61006
ISSN:2162-2434
eISSN:2162-2442
Erschienen in:Journal of mathematical finance
Publisher:Scientific Research
Document Type:Article
Language:English
Year of Publication:2016
Tag:central banking; liquidity management; monetary activism; money supply
Volume:6
Issue:1
Pagenumber:7
First Page:48
Last Page:54
Dewey Decimal Classification:330 Wirtschaft
Open Access:Ja
Licence (German):License Logo  Creative Commons - Namensnennung