Postdoc Jesper Riedler joined the project ”Quantitative Easing and Financial (In)Stability”

Riedler’s research focuses on the impact of regulation and monetary policy on financial markets and the real sector. His contribution to the project is the development of a multi-country model of financial markets in order to analyze the effects of large scale asset purchases by central banks on asset prices, exchange rates and the yield curve. In other work, Riedler analyzes the impact of liquidity regulation on the banking sector. His findings suggest that the liquidity coverage ratio will reduce the loan supply to the real sector, decrease the average maturity of banks’ assets and adversely affect the functioning of the short-term interbank market. Furthermore, the liquidity coverage ratio has an ambiguous effect on financial stability. While commercial banks are stabilized, liquidity risk shifts into the less regulated shadow banking sector, which leads to an increases systemic risk in the financial system.