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The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France

Author

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  • Delatte, Anne-Laure
  • Garg, Pranav
  • Imbs, Jean

Abstract

Using a bank-firm level credit registry combined with firm-level balance sheet data we establish the presence of heterogeneity in the effects of unconventional monetary policy transmission. We examine the consequences of a loosening in the collateral eligibility requirement for credit refinancing in France. The policy was designed to affect bank lending positively. We expect a linear increase in lending and an additional increase in loans to firms with newly acceptable rating. We find a large heterogeneity of the monetary policy transmission including the unexpected reduction of lending by the banks benefiting the most from the policy. These are small, risk-averse banks whose foremost concern after the recession was to strengthen their balance sheets. Banks least affected by the policy respond with a reduction in credit to low risk borrowers in reaction to the change in the market structure. Last we document heterogenous effects of the policy on firms depending on their size.

Suggested Citation

  • 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.
    • Handle: RePEc:cpr:ceprdp:13693
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    References listed on IDEAS

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    1. Breckenfelder, Johannes & De Fiore, Fiorella & Andrade, Philippe & Karadi, Peter & Tristani, Oreste, 2016. "The ECB's asset purchase programme: an early assessment," Working Paper Series 1956, European Central Bank.
    2. 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.
    3. García-Posada, Miguel & Marchetti, Marcos, 2016. "The bank lending channel of unconventional monetary policy: The impact of the VLTROs on credit supply in Spain," Economic Modelling, Elsevier, vol. 58(C), pages 427-441.
    4. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, March.
    5. Foley-Fisher, Nathan & Ramcharan, Rodney & Yu, Edison, 2016. "The impact of unconventional monetary policy on firm financing constraints: Evidence from the maturity extension program," Journal of Financial Economics, Elsevier, vol. 122(2), pages 409-429.
    6. Filippo De Marco, 2017. "Bank Lending and the European Sovereign Debt Crisis," Working Papers 213, Oesterreichische Nationalbank (Austrian Central Bank).
    7. Carla Soares & Diana Bonfim & Nuno Alves, 2016. "Surviving the perfect storm: the role of the lender of last resort," Working Papers w201617, Banco de Portugal, Economics and Research Department.
    8. C. Cahn & A. Duquerroy & W. Mullins, 2017. "Unconventional Monetary Policy and Bank Lending Relationships," Working papers 659, Banque de France.
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    More about this item

    Keywords

    Corporate Finance; individual data; Real Effects Of Monetary Policy; Transmission Channels; Unconventional Monetary Policy;

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • 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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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