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The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK

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  • Leo De Haan
  • Elmer Sterken

Abstract

According to the 'broad credit view' bank-dependent firms are more strongly affected by monetary contractions than firms with access to non-bank forms of external finance. Within the credit view the bank lending channel focuses on the special role of bank loans, and predicts that monetary contractions reduce loan supply to firms facing information problems. However, the 'relationship lending channel' argues that, especially in bank-based economies, bank-dependent firms have close ties with banks, which may reduce the sensitivity of their use of bank debt to monetary shocks. The sensitivity of corporate debt structures to changes in the monetary policy stance is analysed using a sample of 22,000 firms in the Euro area and the UK. Evidence is found for the credit view, the relationship lending channel, but not for the bank lending channel.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal The European Journal of Finance.

Volume (Year): 12 (2006)
Issue (Month): 5 ()
Pages: 401-420

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Handle: RePEc:taf:eurjfi:v:12:y:2006:i:5:p:401-420

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Related research

Keywords: Broad credit view; bank lending channel; relationship lending; monetary policy;

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References

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Citations

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Cited by:
  1. Carmen Martinez-Carrascal & Annalisa Ferrando, 2008. "Towards a monetary policy evaluation framework," Working Paper Series 943, European Central Bank.
  2. Carmen Martínez-Carrascal & Annalisa Ferrando, 2008. "The impact of financial position on investment: an analysis for non-financial corporations in the euro area," Banco de España Working Papers 0820, Banco de España.
  3. Ivo Arnold & Clemens Kool & Katharina Raabe, 2011. "Industry Effects of Bank Lending in Germany," Working Papers 11-21, Utrecht School of Economics.
  4. Eleni Angelopoulou & Heather D. Gibson, 2007. "The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the UK," Working Papers 53, Bank of Greece.

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