The (Unintended?) consequences of the largest liquidity injection ever

• 成果类型: Article
• 署名作者: Crosignani, Matteo; Faria-e-Castro, Miguel; Fonseca, Luis
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - St. Louis; University of London; London Business School
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2019.01.020
• 发表日期: 2020
• 页码: 97-112
• 关键词: Lender of Last Resort; Bank-Sovereign Nexus; collateral; Sovereign debt; Eurozone Crisis

摘要

The design of lender-of-last-resort interventions can exacerbate the bank-sovereign nexus. During sovereign crises, central bank provision of long-term liquidity incentivizes banks to purchase high-yield eligible collateral securities matching the maturity of the central bank loans. Using unique security-level data, we find that the European Central Bank's 3-year Long-Term Refinancing Operation caused Portuguese banks to purchase short-term domestic government bonds, equivalent to 10.6% of amounts outstanding, and pledge them to obtain central bank liquidity. The steepening of eurozone peripheral sovereign yield curves right after the policy announcement is consistent with the equilibrium effects of this collateral trade. (C) 2019 Elsevier B.V. All rights reserved.