Working Paper: CEPR ID: DP15539
Authors: Carlo Altavilla; Luc Laeven; Jos Luis Peydr
Abstract: We document that there are strong complementarities between monetary policy and macroprudential policy in shaping the evolution of bank credit. We use a unique loan-level dataset comprising multiple credit registers from several European countries and different types of loans, including corporate loans, mortgages and consumer credit. We merge this rich information with borrower and bank-level characteristics and with indicators summarising macroprudential and monetary policy actions. We find that monetary policy easing increases both bank lending and lending to riskier borrowers, especially when there is a more accommodative macroprudential environment. These effects are stronger for less capitalised banks. Results apply to both household and firm lending, but they are stronger for consumer and corporate loans than for mortgages. Finally, for firms, the overall increase in bank lending induced by an accommodative policy mix is stronger for more (ex-ante) productive firms than firms with high ex ante credit risk, except for banks with low capital.
Keywords: Monetary Policy; Macroprudential Policy; Corporate and Household Credit; Euro Area
JEL Codes: E51; E52; E58; G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Monetary policy easing (E52) | Bank lending (G21) |
| Monetary policy easing (E52) | Lending to riskier borrowers (G21) |
| Accommodative macroprudential environment (E44) | Bank lending (G21) |
| Monetary policy easing + Accommodative macroprudential environment (E52) | Lending to high credit risk borrowers (G21) |
| Monetary policy easing + Accommodative macroprudential environment (E52) | Lending to more productive firms (G21) |
| Monetary policy easing + Accommodative macroprudential environment (E52) | Lending to less capitalized banks (G21) |