Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Sterilized reserve accumulation reduces room for loans in bank balance sheets by unloading sterilization securities on them, and hence, it may deter loan growth. The effect would be more significant to the banks participating in the primary market for sterilization securities. Using monthly bank-level data for Korea during its massive reserve accumulation period (2003–2008), this paper finds evidence for a crowding-out effect of reserve accumulation. It finds that loan growth rates decline significantly after reserve accumulation, and that the decline is larger in primary dealer banks and foreign bank branches than in non-primary dealer banks and domestic banks, respectively. The results yield the important policy implication that reserve accumulation could work against expansionary effects of capital inflows by mitigating credit expansion and leverage buildup.