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Does unconventional monetary policy boost local economic development? The case of TLTROs and Italy

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  • Perdichizzi, Salvatore
  • Duqi, Andi
  • Molyneux, Philip
  • Tamimi, Hussein Al

Abstract

This study investigates the impact of the ECB's Targeted Longer-Term Refinancing Operations (TLTROs) on Italian provinces’ economic development. The program provided preferential funding to banks conditional on them lending to firms. We find that TLTROs did not generate beneficial effects in terms of economic development across Italian provinces. The results show that average firm investment rate fell, driven by small and micro firms, who witnessed a decline in assets. This had a negative, albeit economically small, impact on per capita GDP and unemployment rates at the provincial level. TLTROs were associated with worsened economic conditions for those firms performing well in the pre-TLTRO period. Distressed (zombie) borrowers saw their investment increase, but their post-TLTRO performance did not improve. Overall, TLTROs did not spur economic development through the lending channel across provinces.

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  • Perdichizzi, Salvatore & Duqi, Andi & Molyneux, Philip & Tamimi, Hussein Al, 2023. "Does unconventional monetary policy boost local economic development? The case of TLTROs and Italy," Journal of Banking & Finance, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622003168
    DOI: 10.1016/j.jbankfin.2022.106736
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    More about this item

    Keywords

    Tltro; Euro area; Unconventional monetary policy; Economic development;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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

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