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Drastic Times Call for Drastic Measures: The ECB LTROs and Credit in The Eurozone Before and After December 2011

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Listed:
  • Cécile Bastidon

    (LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon, CAC-IXXI, Complex Systems Institute)

  • Philippe Gilles

    (UTLN UFR SEG - Université de Toulon - UFR Sciences économiques et de gestion - UTLN - Université de Toulon)

  • Marie-Sophie Gauvin

    (LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris])

Abstract

We study the impact of the European Central Bank Long-term refinancing operations (ECB LTROs) on credit to the non-financial sector, using panel data on twelve countries of the Euro area between December 2008 and July 2014. The tests show that LTROs tested as a dummy have a favorable impact. However, till December 2011, the impact of the amount of LTROs was insignificant or negative. This suggests that full allotment liquidity measures, disclosing interbank markets liquidity needs, could generate adverse collateral effect disturbing the unconventional monetary policies transmission channels, in particular the signaling channel. Moreover, the effectiveness of the signaling channel of liquidity measures would rely on their use as the sole monetary policy tool carrying all the information about the policy stance, while the ECB, whose mandate usually focuses price stability, has twice raised twice its policy rate in 2011.
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Suggested Citation

  • Cécile Bastidon & Philippe Gilles & Marie-Sophie Gauvin, 2019. "Drastic Times Call for Drastic Measures: The ECB LTROs and Credit in The Eurozone Before and After December 2011," Post-Print hal-03318506, HAL.
    • Handle: RePEc:hal:journl:hal-03318506
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