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Viral Acharya, New York University Print
Monday, 20 June 2016, 15:30 - 16:45

Joint with ULB, KUL, UCL, NBB, UA, UGent, ULg, UMons, UNamur, USaint-Louis and VUB 

Viral Acharya, New York University

Whatever it Takes: the Real Effects of Unconventional Monetary Policy

Abstract: On July 26, 2012 Mario Draghi announced to do “whatever it takes” to preserve the Euro and shortly after launched the Outright Monetary Transactions (OMT) Program, which led to a significant reduction in the sovereign yields of periphery countries. Due to their significant holdings of GIIPS sovereign debt, the OMT announcement indirectly recapitalized periphery country banks by increasing the value of their sovereign bond holdings. This paper shows that this backdoor re-capitalization of European banks led to an increased supply of loans to private borrowers in Europe. This loan increase is mostly targeted towards low-quality firms and can at least partly be explained by evergreening of banks that bene-fited from the OMT announcement, but remained weakly capitalized even after the OMT announcement. We show that firms that receive new loans from these banks use the newly available funding to build up cash reserves, but there is no impact on real economic activity like employment or investment. Moreover, the presence of zombie firms depresses employment growth and investment of high quality firms that operate in the same industry. 

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The seminar will take place in the HERMES building of the KU Leuven, campus Brussels.
 rue Montagne aux Herbes potagères 43, Brussels, next to the entrance of the NBB Parking (rue Montagne aux Herbes potagères 41).

Participants of the seminar can use the NBB Parking, please provide us with your name and the lcence plate of your car.

 

Location: HERMES building of the KU Leuven, campus Brussels.
Contact: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Please reply by email before Friday June 17th to nbbfinancial.seminar@nbb.be if you wish to participate to this seminar.

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