The (missing) Transmission of Quantitative Easing

While Quantitative Easing can work through very different channels, the portfolio rebalancing channel for banks has been shown to be effective during the Federal Reserve's Quantitative Easing in the recent years. For Europe,... [ view full abstract ]

While Quantitative Easing can work through very different channels, the portfolio rebalancing channel for banks has been shown to be effective during the Federal Reserve's Quantitative Easing in the recent years. For Europe, this evidence is in question. Using a unique security level dataset on ECB purchases and banks' holdings, we analyze the behavior of Irish resident banks as an reaction to the European Central Bank's (ECB) Extended Asset Purchasing Program (EAPP). We find that banks did not change purchasing trends regarding securities eligible to be bought under the EAPP. We suggest that this is due to the presence of exogenous constraints limiting the pass-through of asset purchases to the real economy.