a column by Ellen Ryan and Karl Whelan for VOX: CEPR’s Policy Portal
The EU’s asset purchase programme saw its central banks’ reserve balances increase to unprecedent levels.
This column analyses the response of banks in the euro area to this expansion in system-wide reserves, in particular whether they absorbed the excess liquidity or tried to push it off their balance sheets. The findings suggest that banks dealt with the increased reserves with the purchase of debt securities or paying down funding sources rather than lending to the real economy.
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