Working Paper: CEPR ID: DP13693
Authors: Annelaure Delatte; Pranav Garg; Jean Imbs
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.
Keywords: unconventional monetary policy; transmission channels; corporate finance; real effects of monetary policy; individual data
JEL Codes: C55; C58; E44; E52; E58; G21; G28; G30; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ACC policy (G52) | bank lending behavior (G21) |
| higher share of newly eligible collateral (G19) | increase in lending (G21) |
| liquidity injection (E41) | reduction in credit supply (E51) |
| being highly affected (above 90th and 95th percentiles) (C46) | reduction in credit supply (E51) |
| moderately affected banks (above 50th and 75th percentiles) (G21) | increase in lending to low-risk firms (G21) |
| control banks (E58) | reduction in lending to low-risk firms (G21) |
| control banks (E58) | shift towards high-risk borrowers (G21) |