We study the effects of the US Federal Reserve's large-scale asset purchase programs during 2008-2014 on bank liquidity … creation. Banks create liquidity when they transform the liquid reserves resulted from quantitative easing into illiquid assets …. As the composition of banks' loan portfolio affects the amount of liquidity it creates, the impact of quantitative easing …

of a freeze, inducing firms to hoard even more liquid assets. Liquidity panics provide a new rationale for stricter … liquidity requirements, as this policy alleviates the informational frictions in the banking sector and paradoxically can end up …