The Portfolio Rebalancing Channel of Quantitative Easing

Valentin Jouvanceau (1)

1 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne

This paper analyzes the portfolio rebalancing channel of Quantitative Easing (QE hereafter) interventions. First, we identify the effects of a QE shock using a Bayesian VAR on US data using a sign and zero restrictions identification scheme. We find that QE shocks have substantial effects on corporate spreads with different ratings, supportive of a portfolio rebalancing channel. Second, we build a DSGE model with a securitzation mechanism. We confront the resulting impulse response functions to those uncovered by our VAR analysis, and find a fairly good match. Finally, we show that the portfolio rebalancing channel crucially affects the transmission of QE shocks to real economy.

Keywords: Quantitative easing; securitization; financial intermediation; portfolio rebalancing channel

Domains: Economics and Finance

Valentin Jouvanceau. The Portfolio Rebalancing Channel of Quantitative Easing. 2016. ⟨halshs-01349870⟩