Quantitative easing and its implications for contingent convertible triggers: an analytical perspective
Quantitative Easing (QE) has become a critical monetary policy tool, particularly after the 2008 Financial Crisis and the COVID-19 pandemic, aimed at stimulating economic activity through large-scale bond purchases. QE raises asset prices, lowers interest rates, and enhances market liquidity, but it...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2024-12-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1805.pdf
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| Summary: | Quantitative Easing (QE) has become a critical monetary policy tool, particularly after
the 2008 Financial Crisis and the COVID-19 pandemic, aimed at stimulating economic activity
through large-scale bond purchases. QE raises asset prices, lowers interest rates, and enhances
market liquidity, but its long-term effects on financial stability and instruments like Contingent
Convertible (CoCo) bonds are less understood. This study explores how QE indirectly impacts CoCo
bond activation by influencing banks’ capital adequacy. Using the 2023 Credit Suisse crisis as a
case study, we model how QE reshapes bank capital structures, increasing CoCo activation risks
during financial instability. |
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| ISSN: | 1841-8678 1844-0029 |