25 Years IWH

Veranstaltung
15
Jan 2018

14:15 - 15:45

Cutting Out the Middleman – The ECB as Corporate Bond Investor

We propose a novel mechanism how central bank interventions can affect the real economy: direct corporate debt purchases by a central bank can increase the effectiveness of the banklending channel.

Speaker
Professor Dr. Sascha Steffen , Frankfurt School of Finance & Management
Location
IWH, conference room
Professor Dr. Sascha Steffen

Über den Autor

Professor Dr. Sascha Steffen

Professor of Finance, Frankfurt School of Finance & Management, since August 2017

We propose a novel mechanism how central bank interventions can affect the real economy: direct corporate debt purchases by a central bank can increase the effectiveness of the banklending channel. We test this conjecture in the context of the European Central Bank’s Corporate Sector Purchase Programme (CSPP), launched in June 2016, which increases the supply and lowers the cost of capital for eligible, i.e., investment-grade rated, firms. These firms substitute bank term loans with bond debt. Banks with a high share of CSPP-eligible firms in their loan portfolio increase lending to private but not public firms after the announcement of the CSPP. The increase in lending is driven by previously weakly capitalized banks (low Tier 1 ratio and banks from GIIPS countries) consistent with an easing of bank capital constraints through the CSPP.

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