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The Transmission Mechanism Of Credit Support Policies In The Euro Area

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  • Jef Boeckx
  • Maite De Sola Perea
  • Gert Peersman

    ()

Abstract

We use an original monthly dataset of 131 individual euro area banks to examine the effectiveness and transmission mechanism of the Eurosystem’s credit support policies since the start of the crisis. First, we show that these policies have indeed been succesful in stimulating the credit flow of banks to the private sector. Second, we find support for the "bank lending view" of monetary transmission. Specifically, the policies have had a greater impact on loan supply of banks that are more constrained to obtain unsecured external funding, i.e. small banks (size effect), banks with less liquid balance sheets (liquidity effect), banks that depend more on wholesale funding (retail effect) and low-capitalized banks (capital e ffect). The role of bank capital is,however, ambiguous. Besides the above favorable direct effect on loan supply, lower levels of bank capitalization at the same time mitigate the size, retail and liquidit effects of the policies. The drag on the other channels has even been dominant during the sample period, i.e. better capitalized banks have on average responded more to the credit support policies of the Eurosystem as a result of more favourable size, retail and liquidity effects.

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  • Jef Boeckx & Maite De Sola Perea & Gert Peersman, 2016. "The Transmission Mechanism Of Credit Support Policies In The Euro Area," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 16/926, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:16/926
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    Cited by:

    1. M. de Sola Perea & M. Kasongo Kashama, 2017. "The negative interest rate policy in the euro area and the supply of bank loans," Economic Review, National Bank of Belgium, issue iii, pages 42-61, december.
    2. Laine, Olli-Matti, 2019. "The effect of TLTRO-II on bank lending," Research Discussion Papers 7/2019, Bank of Finland.
    3. Miroslav Gabrovski & Victor Ortego-Marti, 2018. "Search and Credit Frictions in the Housing Market," Working Papers 201816, University of California at Riverside, Department of Economics.
    4. Salomon Fiedler & Isabel Hanisch & Dr. Nils Jannsen Hanisch & Prof. Dr. Maik Wolters, 2017. "Effectiveness of Unconventional Monetary Policy in the Euro Area: An Assessment Based on a Literature Survey," Credit and Capital Markets, Credit and Capital Markets, vol. 50(4), pages 455-488.
    5. Joost Bats & Tom Hudepohl, 2019. "Impact of targeted credit easing by the ECB: Bank-level evidence," DNB Working Papers 631, Netherlands Central Bank, Research Department.
    6. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    7. Aleksander Berentsen & Hugo van Buggenum & Romina Ruprecht, 2020. "On the negatives of negative interest rates and the positives of exemption thresholds," ECON - Working Papers 372, Department of Economics - University of Zurich.
    8. Cormac Cawley & Marie Finnegan, 2019. "Transmission Channels of Central Bank Asset Purchases in the Irish Economy," Economies, MDPI, Open Access Journal, vol. 7(4), pages 1-1, September.
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    More about this item

    Keywords

    unconventional monetary policy; bank lending; monetary transmission mechanism;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • 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
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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