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Not all shocks are created equal: assessing heterogeneity in the bank lending channel

Author

Listed:
  • Blattner, Laura
  • Farinha, Luísa
  • Nogueira, Gil

Abstract

We provide evidence that the strength of the bank lending channel varies considerably across three major events in the European sovereign debt crisis - the Greek debt restructuring (PSI), outright monetary transactions (OMT), and quantitative easing (QE). We study how lending responds to each shock using detailed bank, firm, and household data from Portugal, a country that was directly exposed to the three events. While the price of sovereign debt securities increased in all three events, banks reduced sovereign debt holdings and realized accumulated capital gains only after QE. As a result, lending to final borrowers reacted more strongly to QE than to the PSI or OMT events. Our results suggest that asset purchases were more effective than signalling events at stimulating the bank lending channel. JEL Classification: E52, E58, G18, G21

Suggested Citation

  • Blattner, Laura & Farinha, Luísa & Nogueira, Gil, 2021. "Not all shocks are created equal: assessing heterogeneity in the bank lending channel," Working Paper Series 2607, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212607
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2607~502b338f4a.en.pdf
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    Cited by:

    1. António Afonso & Francisco Gomes Pereira, 2022. "Unconventional Monetary Policy in the Euro Area. Impacts on Loans, Employment, and Investment," CESifo Working Paper Series 9610, CESifo.

    More about this item

    Keywords

    asset purchases; bank lending channel; OMT; PSI; QE;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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