Quantitative Easing (QE) created huge excess reserves of Eurozone credit institutions. When Quantitative Tightening (QT) set in, these reserves had to be remunerated by the European Central Bank (ECB) at the deposit facility rate. Hence, credit institutions presently benefit from large interest incomes on their reserve holdings, reflected by increasing share prices. I study the case of Deutsche Bank Aktiengesellschaft (AG) using a structural vector autoregression (SVAR) framework to identify the root causes of the recent rise in Deutsche Bank share prices. In order to identify the effects of QT on stock prices, each empirical model is estimated on two different samples: One sample which ends in June 2022 when QE was discontinued and a second sample spanning the same time period plus the rather short QT-period July 2022 to September 2023. The stark difference in results suggests that autonomous monetary policy decisions which raised the deposit facility rate since June 2022 have significantly increased the price of Deutsche Bank stocks. Since the interest payments to commercial credit institutions are not offset by revenues from ECB assets purchased during QE, this implies that private wealth of shareholders increased at the expense of central bank profits that would normally contribute to public budgets.
| Published in | International Journal of Economics, Finance and Management Sciences (Volume 12, Issue 5) |
| DOI | 10.11648/j.ijefm.20241205.21 |
| Page(s) | 336-351 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2024. Published by Science Publishing Group |
Quantitative Easing, Central Bank Losses, Deposit Facility, Structural Vector Autoregression
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APA Style
Lucke, B. (2024). Central Bank Losses and the Shareholder Values of Commercial Credit Institutions. International Journal of Economics, Finance and Management Sciences, 12(5), 336-351. https://doi.org/10.11648/j.ijefm.20241205.21
ACS Style
Lucke, B. Central Bank Losses and the Shareholder Values of Commercial Credit Institutions. Int. J. Econ. Finance Manag. Sci. 2024, 12(5), 336-351. doi: 10.11648/j.ijefm.20241205.21
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Download@article{10.11648/j.ijefm.20241205.21,
author = {Bernd Lucke},
title = {Central Bank Losses and the Shareholder Values of Commercial Credit Institutions
},
journal = {International Journal of Economics, Finance and Management Sciences},
volume = {12},
number = {5},
pages = {336-351},
doi = {10.11648/j.ijefm.20241205.21},
url = {https://doi.org/10.11648/j.ijefm.20241205.21},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20241205.21},
abstract = {Quantitative Easing (QE) created huge excess reserves of Eurozone credit institutions. When Quantitative Tightening (QT) set in, these reserves had to be remunerated by the European Central Bank (ECB) at the deposit facility rate. Hence, credit institutions presently benefit from large interest incomes on their reserve holdings, reflected by increasing share prices. I study the case of Deutsche Bank Aktiengesellschaft (AG) using a structural vector autoregression (SVAR) framework to identify the root causes of the recent rise in Deutsche Bank share prices. In order to identify the effects of QT on stock prices, each empirical model is estimated on two different samples: One sample which ends in June 2022 when QE was discontinued and a second sample spanning the same time period plus the rather short QT-period July 2022 to September 2023. The stark difference in results suggests that autonomous monetary policy decisions which raised the deposit facility rate since June 2022 have significantly increased the price of Deutsche Bank stocks. Since the interest payments to commercial credit institutions are not offset by revenues from ECB assets purchased during QE, this implies that private wealth of shareholders increased at the expense of central bank profits that would normally contribute to public budgets.
},
year = {2024}
}
TY - JOUR T1 - Central Bank Losses and the Shareholder Values of Commercial Credit Institutions AU - Bernd Lucke Y1 - 2024/10/31 PY - 2024 N1 - https://doi.org/10.11648/j.ijefm.20241205.21 DO - 10.11648/j.ijefm.20241205.21 T2 - International Journal of Economics, Finance and Management Sciences JF - International Journal of Economics, Finance and Management Sciences JO - International Journal of Economics, Finance and Management Sciences SP - 336 EP - 351 PB - Science Publishing Group SN - 2326-9561 UR - https://doi.org/10.11648/j.ijefm.20241205.21 AB - Quantitative Easing (QE) created huge excess reserves of Eurozone credit institutions. When Quantitative Tightening (QT) set in, these reserves had to be remunerated by the European Central Bank (ECB) at the deposit facility rate. Hence, credit institutions presently benefit from large interest incomes on their reserve holdings, reflected by increasing share prices. I study the case of Deutsche Bank Aktiengesellschaft (AG) using a structural vector autoregression (SVAR) framework to identify the root causes of the recent rise in Deutsche Bank share prices. In order to identify the effects of QT on stock prices, each empirical model is estimated on two different samples: One sample which ends in June 2022 when QE was discontinued and a second sample spanning the same time period plus the rather short QT-period July 2022 to September 2023. The stark difference in results suggests that autonomous monetary policy decisions which raised the deposit facility rate since June 2022 have significantly increased the price of Deutsche Bank stocks. Since the interest payments to commercial credit institutions are not offset by revenues from ECB assets purchased during QE, this implies that private wealth of shareholders increased at the expense of central bank profits that would normally contribute to public budgets. VL - 12 IS - 5 ER -
Department of Economics, University of Hamburg, Hamburg, Germany
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