Capital Allocation Imbalance and the Effects on Monetary Policy
Date of Award
Doctor of Business Administration (DBA)
Jack Welch College of Business
Dr. Lucjan T. Orlowski
Dr. Abu Amin
Dr. Lorán Chollete
This paper examines the association between liquidity injections and capital allocations in the United States. In the analysis, liquidity injections are proxied by monetary base and the capital allocations are reflected by excess reserves, vault cash, total bank credit, and M2-M1. Monthly data are utilized for all variables for the sample period March 1984 – June 2020. Four Bai-Perron multiple breakpoint regressions and Markov switching estimations are employed to examine changeable patterns and interactions. The results indicate that liquidity injections are imbalanced and are allocated to total bank credit prior to quantitative easing, excess reserves prior to QE through post-QE, vault cash prior to QE and through QE, and M2-M1 post-QE. There is also evidence of a profound portfolio rebalancing effect especially during the post-QE period.
E5, E42, E52, E58, G01
George, P. G. (2021). Capital allocation imbalance and the effects on monetary policy. Jack Welch College of Business & Technology dissertation, Sacred Heart University, Fairfield CT.
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In partial fulfillment of the requirements for the degree of Doctor of Business Administration in Finance Sacred Heart University, Jack Welch College of Business and Technology, Fairfield, Connecticut.