"Excess Reserves and Monetary Policy Tightening" (with Daniel Fricke and Stefan Greppmair)
Review of Finance (accepted)
Also available as Bundesbank Discussion Paper No. 05/2024.
We show that the transmission of a monetary policy tightening varies in the cross-section of banks when central bank reserves are abundant. Specifically, the net worth of reserve-rich banks may display a boost when the interest rate paid on reserves increases strongly. Focusing on the ECB’s 2022 rate hiking cycle, we show that reserve-rich banks’ credit supply is less sensitive to the monetary policy tightening compared to other banks. The effect varies in the cross-section of both banks and firms. The results are binding at the firm level, indicating the presence of real effects.
Covered in: Börsen-Zeitung; Platow Brief; El Confidential; Financial Times; Bundesbank Research Brief; VoxEU; SUERF Policy Brief; Speech by Bundesbank President Nagel
Presentations: CEBRA 2024, ECB ChaMP Inaugural Conference 2024, VfS 2024, DNB Annual Research Conference 2023, EBA Research Workshop 2023, BIS Research Workshop 2023, Regulating Financial Markets Conference 2023, ECB MPC Research Workshop 2023, SUERF/Bocconi Conference 2023, Bundesbank Research Seminar 2023.
"You Can't Always Get What You Want (Where You Want It): Cross-Border Effects of the US Money Market Fund Reform" (with Daniel Fricke and Stefan Greppmair)
Journal of International Economics, 147, 2024, 103846
DOI, also available as Bundesbank Discussion Paper No. 03/2022.
This paper documents significant cross-border effects of the 2014 US money market fund (MMF) reform on euro area MMFs. As US-based prime funds became less money-like due to the reform, euro area-based prime funds received large inflows from foreign investors. These cross-border flows were motivated by the search for stable net asset value instruments rather than by the introduction of gates and fees. Consistent with an easing of competitive pressure, euro area prime MMFs reduced their risk-taking. We find that the EU MMF regulation did not lead to a reversal of the documented cross-border flows.
Journal of Financial and Quantitative Analysis, 56(2), 2021, pp. 531-568
DOI, also available as Bundesbank Discussion Paper No. 22/2018 .
This paper studies the impact of unconventional monetary policy on bank lending and security holdings. I exploit granular security register data and use a difference-in-differences regression setup to provide evidence for a yield-induced portfolio rebalancing: Banks experiencing large average yield declines in their securities portfolio - induced by unconventional monetary policy - increase their real sector lending more strongly relative to other banks. The effect is stronger for banks facing many reinvestment decisions. Moreover, I find that banks with large yield declines reduce their government bond holdings and sell securities bought under the ECB's asset purchase program.
"Central Bank Collateral Policy and the Allocation of Safe Assets in Secured Funding Markets" (with Stefan Greppmair)
Being revised for resubmission to Review of Finance
We show that central bank collateral policy affects the allocation and pricing of collateral in secured funding markets. For identification we take advantage of a temporary extension of the European Central Bank's collateral framework that allowed banks to pledge previously ineligible credit claims for refinancing. Using a difference-in-differences design based on banks' ex-ante collateral composition, we find that banks affected by the temporary extension substitute away from government bonds in central bank operations and instead redeploy these assets as collateral in the repo market, leading to higher lending volumes, greater collateral reuse, lower repo specialness and rate dispersion. Our findings thus demonstrate that collateral framework design influences the effective supply and distribution of collateral in secured funding markets.
Presentations: ECB Money Markets Conference 2024, Fed Board/University of Maryland Short-Term Funding Markets (STFM) Conference 2024, DGF 2024, OeNB/SUERF Annual Economic Conference 2024, ECB MPC Research Workshop 2024, EEA 2024, Bundesbank Research Workshop 2024, IBEFA 2025.
"Financing Service Trade" (with Marcus Biermann and Peter Eppinger)
"Monetary Policy and Money Market Funds in Europe" (with Marco Cipriani, Daniel Fricke, Stefan Greppmair, Gabriele LaSpada)
Federal Reserve Bank of New York Liberty Street Economics, April 11, 2024