Unintended Consequences of Crisis Interventions for Financial Stability
Final Report Abstract
The research conducted during the time of this project opens up interesting avenues for future research. Importantly, the Eurozone appears to have lost momentum in completing the banking or capital markets union. Our research has shown that even methods that have been implemented were only partially successful. More research is needed to assess methods that have already been implemented and provide guidance how further safeguard financial stability. These are first order questions that need to be addressed. Additionally, we provide some evidence as to the impact of central bank interventions on financial stability. However, as explained above, very detailed micro-level data is hardly available to us researchers. In the context of the ECB interventions, it is thus important to ask further with respect to the effectiveness of different central bank programs or the sequence of central bank interventions. While we highlight channels of how purchases of sovereign and corporate bonds can affect insurance and bank portfolios (as well as the real economy), other asset classes could potentially be purchased with similar effects. That is, should the ECB expand its portfolio of assets that are purchased? Are sovereign and corporate bonds the most efficient way of reaching its primary objective? What would be the implications on the financial and real sector? We leave these important questions for future research.
Publications
- (2019). A Capital Structure Channel of Monetary Policy. Journal of Financial Economics, 133 (2), 357-378
Große-Rueschkamp, B., S. Steffen, and D. Streitz
(See online at https://doi.org/10.1016/j.jfineco.2019.03.006) - (2020) Are European Banks Still Too-Big-to-Fail? The Impact of Government Interventions and Regulatory Reform on Bailout Expectations in the EU
Borchert, L.
(See online at https://dx.doi.org/10.2139/ssrn.3098296) - (2020) Gap-filling government debt maturity choice, ESRB Working Paper
Eidam, F.
(See online at https://doi.org/10.2139/ssrn.3723466)
