IDEAS home Printed from https://ideas.repec.org/p/bdi/wptemi/td_1536_26.html

The real effects of monetary policy transmission via the floating-rate channel

Author

Listed:
  • Margherita Bottero

    (Bank of Italy)

  • Michele Cascarano

    (Bank of Italy)

  • Alessandro Modica

    (Bank of Italy)

  • Federico Maria Signoretti

    (Bank of Italy)

Abstract

In this paper we quantify the transmission of the 2022-23 tightening cycle to euro-area firms through the floating-rate channel, that is, via their heterogeneous exposure to the repricing of outstanding bank debt. As firms' exposure to floating-rate loans is not exogenous, we instrument it with the random exposure of their lenders to the inflow of retail deposits ensuing from the ECB's Asset Purchase Programme, which affected intermediaries' propensity to lend at floating rates. According to our estimates, an increase of 450 basis points in the 3-month Euribor rate (as observed in 2022-23) would have reduced the investment rate of companies with a high share of floating-rate debt (in or above the 75th percentile) by 14.8 percentage points more than for those with fixed-rate debt only. This effect compares with an average investment rate in the sample of 14 per cent.

Suggested Citation

  • Margherita Bottero & Michele Cascarano & Alessandro Modica & Federico Maria Signoretti, 2026. "The real effects of monetary policy transmission via the floating-rate channel," Temi di discussione (Economic working papers) 1536, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1536_26
    as

    Download full text from publisher

    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1536/en_tema_1536.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
    2. Ippolito, Filippo & Ozdagli, Ali K. & Perez-Orive, Ander, 2018. "The transmission of monetary policy through bank lending: The floating rate channel," Journal of Monetary Economics, Elsevier, vol. 95(C), pages 49-71.
    3. Kirti, Divya, 2020. "Why do bank-dependent firms bear interest-rate risk?," Journal of Financial Intermediation, Elsevier, vol. 41(C).
    4. Diamond, William & Jiang, Zhengyang & Ma, Yiming, 2024. "The reserve supply channel of unconventional monetary policy," Journal of Financial Economics, Elsevier, vol. 159(C).
    5. Acharya, Viral & Chauhan, Rahul & Rajan, Raghuram & Steffen, Sascha, 2022. "Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets," CEPR Discussion Papers 17622, Centre for Economic Policy Research.
    6. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    7. Eric Ohrn, 2018. "The Effect of Corporate Taxation on Investment and Financial Policy: Evidence from the DPAD," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 272-301, May.
    8. Alexander Rodnyansky & Olivier M. Darmouni, 2017. "The Effects of Quantitative Easing on Bank Lending Behavior," The Review of Financial Studies, Society for Financial Studies, vol. 30(11), pages 3858-3887.
    9. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    10. Michael Greenstone & Alexandre Mas & Hoai-Luu Nguyen, 2020. "Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and "Normal" Economic Times," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 200-225, February.
    11. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
    12. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    13. Itamar Drechsler & Alexi Savov & Philipp Schnabl, 2017. "The Deposits Channel of Monetary Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1819-1876.
    14. Jonathan S. Hartley & Kevin A. Hassett & Joshua D. Rauh, 2025. "Firm Investment and the User Cost of Capital: New US Corporate Tax Reform Evidence," NBER Chapters, in: Tax Policy and the Economy, Volume 40, pages 171-206, National Bureau of Economic Research, Inc.
    15. Ryan, Ellen & Whelan, Karl, 2021. "Quantitative easing and the hot potato effect: Evidence from euro area banks," Journal of International Money and Finance, Elsevier, vol. 115(C).
    16. Robert S. Chirinko, 1992. "Business Fixed Investment Spending: A Critical survey of Modeling Strategies, Empirical Results, and Policy Implications," Working Papers 9213, Harris School of Public Policy Studies, University of Chicago.
    17. John Kandrac & Bernd Schlusche, 2021. "Quantitative Easing and Bank Risk Taking: Evidence from Lending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(4), pages 635-676, June.
    18. Eric Zwick & James Mahon, 2017. "Tax Policy and Heterogeneous Investment Behavior," American Economic Review, American Economic Association, vol. 107(1), pages 217-248, January.
    19. Refet Gürkaynak & Hati̇ce Gökçe Karasoy‐Can & Sang Seok Lee, 2022. "Stock Market's Assessment of Monetary Policy Transmission: The Cash Flow Effect," Journal of Finance, American Finance Association, vol. 77(4), pages 2375-2421, August.
    20. Emmanuel Farhi & Jean Tirole, 2009. "Leverage and the Central Banker's Put," American Economic Review, American Economic Association, vol. 99(2), pages 589-593, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Camelia Minoiu & Andrés Schneider & Min Wei, 2023. "Why Does the Yield Curve Predict GDP Growth? The Role of Banks," FRB Atlanta Working Paper 2023-14, Federal Reserve Bank of Atlanta.
    2. Altavilla, Carlo & Boucinha, Miguel & Burlon, Lorenzo & Adalid, Ramon & Fortes, Roberta & Maruhn, Franziska, 2026. "Stablecoins and Monetary Policy Transmission," CEPR Discussion Papers 21321, Centre for Economic Policy Research.
    3. Mira Farka, 2022. "The credit channel of monetary policy before and after the zero lower bound: Evidence from the US equity market," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(3), pages 633-693, September.
    4. Paludkiewicz, Karol & Fricke, Daniel & Greppmair, Stefan, 2024. "Excess Reserves and Monetary Policy Tightening," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302364, Verein für Socialpolitik / German Economic Association.
    5. Lea Best & Benjamin Born & Manuel Menkhoff, 2025. "The Impact of Interest: Firms' Investment Sensitivity to Interest Rates," CESifo Working Paper Series 12167, CESifo.
    6. Altavilla, Carlo & Boucinha, Miguel & Burlon, Lorenzo & Giannetti, Mariassunta & Schumacher, Julian, 2025. "Central bank liquidity reallocation and bank lending: Evidence from the tiering system," Journal of Financial Economics, Elsevier, vol. 168(C).
    7. Li, Boyao, 2024. "A balance sheet analysis of monetary policy effects on banks," Global Finance Journal, Elsevier, vol. 61(C).
    8. Camelia Minoiu & Andrés Schneider & Min Wei, 2023. "Term Premium and Bank Lending," Finance and Economics Discussion Series 2023-049r1, Board of Governors of the Federal Reserve System (U.S.), revised 06 Jul 2026.
    9. Schepens, Glenn & Core, Fabrizio & De Marco, Filippo & Eisert, Tim, 2025. "Inflation and floating-rate loans: evidence from the euro-area," Working Paper Series 3064, European Central Bank.
    10. Gomez, Matthieu & Landier, Augustin & Sraer, David & Thesmar, David, 2021. "Banks’ exposure to interest rate risk and the transmission of monetary policy," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 543-570.
    11. Diamond, William & Jiang, Zhengyang & Ma, Yiming, 2024. "The reserve supply channel of unconventional monetary policy," Journal of Financial Economics, Elsevier, vol. 159(C).
    12. Sarto, Andrés & Wang, Olivier, 2026. "The secular decline in interest rates and the rise of shadow banks," Journal of Financial Economics, Elsevier, vol. 177(C).
    13. Kārlis Vilerts & Sofia Anyfantaki & Konstantīns Beņkovskis & Sebastian Bredl & Massimo Giovannini & Florian Matthias Horky & Vanessa Kunzmann & Tibor Lalinský & Athanasios Lampousis & Elizaveta Lukman, 2026. "Details Matter: Loan Pricing and Transmission of Monetary Policy in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 22(2), pages 1-89, April.
    14. Li, Boyao, 2024. "A balance sheet analysis of monetary policy effects on banks," MPRA Paper 120882, University Library of Munich, Germany.
    15. Darmouni, Olivier & Geisecke, Oliver & Rodnyanky, Alexander, 2019. "The Bond Lending Channel of Monetary Policy," MPRA Paper 95141, University Library of Munich, Germany.
    16. Buchholz, Manuel & Schmidt, Kirsten & Tonzer, Lena, 2020. "Do conventional monetary policy instruments matter in unconventional times?," Journal of Banking & Finance, Elsevier, vol. 118(C).
    17. Maingi, Quinn, 2026. "Regional Banks, Aggregate Effects," Journal of Financial Economics, Elsevier, vol. 176(C).
    18. Steven A. Sharpe & Gustavo A. Suarez, 2021. "Why Isn’t Business Investment More Sensitive to Interest Rates? Evidence from Surveys," Management Science, INFORMS, vol. 67(2), pages 720-741, February.
    19. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    20. Philipp Roderweis & Jamel Saadaoui & Francisco Serranito, 2023. "The Unintended Consequences of ECB’s Asset Purchases. How Excess Reserves Shape Bank Lending," Working Papers of BETA 2023-34, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_1536_26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bdigvit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.