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The transmission of monetary policy through credit standards: evidence on loan application discouragement in the euro area

Author

Listed:
  • Georgios Mermelas

    (University of Patras)

  • Athanasios Tagkalakis

    (Bank of Greece and University of Patras)

Abstract

This study examines the impact of monetary policy and its announcements on firms’ loan application discouragement, operating through changes in credit standards. We merge firm-level data from the Survey on the Access to Finance of Enterprises (SAFE) with bank-level data from the Bank Lending Survey (BLS) for twenty-euro area countries, covering the period from the first half of 2009 to the second half of 2024. The findings indicate that, following a monetary policy–induced tightening of credit standards, firms with higher turnover, stronger credit records and more stable balance sheets exhibit a lower propensity to become discouraged from applying for loans. Conversely, firms with weaker characteristics are more adversely affected. Importantly, these effects persist even when the analysis is restricted to firms with a very low probability of loan rejection, indicating that monetary policy induces a self-restriction mechanism that operates in addition to the traditional credit supply channel.

Suggested Citation

  • Georgios Mermelas & Athanasios Tagkalakis, 2026. "The transmission of monetary policy through credit standards: evidence on loan application discouragement in the euro area," Working Papers 362, Bank of Greece.
    • Handle: RePEc:bog:wpaper:362
    DOI: 10.52903/wp2026362
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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