Raghu Rajan

Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets

National Bureau of Economic Research · 2023-03-01 · 43 citations

When the Federal Reserve (Fed) expanded its balance sheet via quantitative easing (QE), commercial banks financed reserve holdings with deposits and reduced their average maturity.They also issued lines of credit to corporations.However, when the Fed halted its balance-sheet expansion in 2014 and even reversed it during quantitative tightening (QT) starting in 2017, there was no commensurate shrinkage of these claims on liquidity.Consequently, the financial sector was left more sensitive to pote…

What Purpose Do Corporations Purport? Evidence from Letters to Shareholders

National Bureau of Economic Research · 2023-03-01 · 35 citations

Using natural language processing, we identify corporate goals stated in the shareholder letters of the 150 largest companies in the United States from 1955 to 2020.Corporate goals have proliferated, from less than one on average in 1955 to more than 7 in 2020.While in 1955, profit maximization, market share growth, and customer service were dominant goals, today almost all companies proclaim social and environmental goals as well.We examine why firms announce goals and when.We find goal announc…

Liquidity, Liquidity Everywhere, Not a Drop to Use: Why Flooding Banks with Central Bank Reserves May Not Expand Liquidity

The Journal of Finance · 2024-07-05 · 18 citations

ABSTRACT Central bank balance sheet expansion, through actions like quantitative easing, is run through commercial banks. While this increases liquid central bank reserves held on commercial bank balance sheets, demandable uninsured deposits issued to finance the reserves also increase. Subsequent shrinkage in the central bank balance sheet may entail shrinkage in bank‐held reserves without a commensurate reduction in deposit claims. Furthermore, during episodes of liquidity stress, when many cl…

Liquidity, pledgeability, and the nature of lending

Journal of Financial Economics · 2021 · 17 citations

Sovereign debt and economic growth when government is myopic and self-interested

Journal of International Economics · 2024-02-28 · 7 citations