Did Quantitative Easing boost bank lending?

Nick Butt, Rohan Churm & Michael McMahon 

When faced by a slowing economy and contracting credit what policy should be used?  There is a body of evidence to suggest that QE is an effective means to boosting asset prices, aggregate demand and inflation, but it’s far less clear whether it improves the flow of credit to the economy.  In theory, increases in deposit funding caused by such purchases might lead banks to increase lending.  In this post we explore how this might occur.  But we find no evidence that this happened in the UK.  This may reflect the fact that QE worked instead through a so called ‘portfolio rebalancing channel’ and that the resulting churn in banks’ deposit funding stopped any such channel from operating. Continue reading “Did Quantitative Easing boost bank lending?”