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Monetary Policy, Bank Capital, and Credit Supply: A Role for Discouraged and Informally Rejected Firms

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  • Alexander Popov

    (European Central Bank)

Abstract

This paper conducts the first empirical study of the bank balance sheet channel using data on discouraged and informally rejected firms, in addition to information on the formal loan-granting process, in eight economies that use the euro or are pegged to it over 2004–7. Consistent with previous studies, I find that lax monetary conditions increase bank credit in general and bank credit to ex ante risky firms in particular, especially for banks with lower capital ratios. Importantly, I find that the results are considerably stronger when data on informal credit constraints are incorporated.

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  • Alexander Popov, 2016. "Monetary Policy, Bank Capital, and Credit Supply: A Role for Discouraged and Informally Rejected Firms," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 95-141, March.
  • Handle: RePEc:ijc:ijcjou:y:2016:q:1:a:4
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    Cited by:

    1. Annalisa Ferrando & Alexander Popov & Gregory F. Udell, 2019. "Do SMEs Benefit from Unconventional Monetary Policy and How? Microevidence from the Eurozone," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 895-928, June.
    2. Szabó, Zsolt, 2019. "Elbátortalanodott hiteligénylők a vállalati szektorban [Discouraged borrowers in the corporate sector]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1145-1186.
    3. Guillermo Peña, 2017. "Money, Lending and Banking Crises," Economic Papers, The Economic Society of Australia, vol. 36(4), pages 444-458, December.
    4. Adrian Babin, 2015. "Home-Host Banking Issues and Non-Core Funding—Evidence from Central and Eastern Europe," Open Economies Review, Springer, vol. 26(3), pages 447-477, July.
    5. Ferrando, Annalisa & Popov, Alexander & Udell, Gregory F., 2017. "Sovereign stress and SMEs’ access to finance: Evidence from the ECB's SAFE survey," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 65-80.
    6. Orçun Kaya & Oliver Masetti, 2019. "Small‐ And Medium‐Sized Enterprise Financing And Securitization: Firm‐Level Evidence From The Euro Area," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 391-409, January.
    7. Tuuli, Saara, 2019. "Model-based regulation and firms' access to finance," Research Discussion Papers 4/2019, Bank of Finland.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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