Mortgage lending, monetary policy, and prudential measures in small euro‐area economies: Evidence from Ireland and the Netherlands

This paper examines whether the increased use of macroprudential policies since the global financial crisis has affected the impact of (euro‐area and foreign) monetary policy on mortgage lending in Ireland and the Netherlands, which are both small open economies in the euro area. Using quarterly bank‐level data on domestic lending in both countries for 2003–2018, we find that restrictive euro‐area monetary policy shocks reduce the growth of mortgage lending. We find evidence that stricter domestic prudential regulation mitigates this effect in Ireland, but not so in the Netherlands. There is some weak evidence for an international bank lending channel that can be mitigated by stricter lender‐based domestic prudential regulation.