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Unconventional Monetary Policy and Bank Lending Relationships

Author

Listed:
  • C. Cahn
  • A. Duquerroy
  • W. Mullins

Abstract

How to support private lending to firms in recessions is a major open question. This paper uses an unexpected change in the collateral framework of the European Central Bank that reduced the cost of funding loans to a subset of firms in France in 2012, to examine how bank adjust their corporate lending portfolio in a downturn. It provides causal evidence that targeted unconventional monetary policy can be an effective lever to increase private credit and reduce contagion of financial distress. The effect is strongly driven by firms with only a single bank relationship, especially less risky borrowers with information intensive banking relationships.

Suggested Citation

  • C. Cahn & A. Duquerroy & W. Mullins, 2017. "Unconventional Monetary Policy and Bank Lending Relationships," Working papers 659, Banque de France.
  • Handle: RePEc:bfr:banfra:659
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Philippe Aghion & Antonin Bergeaud & Gilbert Cette & Rémy Lecat & Hélène Maghin, 2018. "The Inverted-U Relationship between Credit Access and Productivity Growth," CEP Discussion Papers dp1588, Centre for Economic Performance, LSE.
    2. Christophe Blot & Jérôme Creel & Paul Hubert, 2018. "The effect and risks of ECB collateral framework changes," Sciences Po publications info:hdl:2441/4hi059h9n59, Sciences Po.
    3. repec:bfr:rueban:2018:65 is not listed on IDEAS
    4. Christophe Cahn & Mattia Girotti & Federica Salvadè, 2018. "External Credit Ratings and Bank Lending," Working papers 691, Banque de France.
    5. Philippe Aghion & Antonin Bergeaud & Gilbert Cette & Rémy Lecat & Hélène Maghin, 2019. "Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth," Economica, London School of Economics and Political Science, vol. 86(341), pages 1-31, January.
    6. William Mullins & Patricio Toro, 2018. "Credit Guarantees and New Bank Relationships," Working Papers Central Bank of Chile 820, Central Bank of Chile.
    7. Schoenmaker, Dirk, 2019. "Greening monetary policy," CEPR Discussion Papers 13576, C.E.P.R. Discussion Papers.
    8. Delatte, Anne-Laure & Garg, Pranav & Imbs, Jean, 2019. "The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France," CEPR Discussion Papers 13693, C.E.P.R. Discussion Papers.
    9. Paolo Fegatelli, 2019. "Central bank digital currencies: The case of universal central bank reserves," BCL working papers 130, Central Bank of Luxembourg.
    10. Stephan Luck & Thomas Zimmermann, 2018. "Employment Effects of Unconventional Monetary Policy : Evidence from QE," Finance and Economics Discussion Series 2018-071, Board of Governors of the Federal Reserve System (US).

    More about this item

    Keywords

    Unconventional Monetary Policy; Relationship Banking; SME finance; Bank Lending; Small Business; Collateral.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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