The impact of TLTRO2 on the Italian credit market: some econometric evidence

Lucia Esposito (), Davide Fantino and Yeji Sung ()
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Lucia Esposito: Bank of Italy
Yeji Sung: Columbia University

No 1264, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper evaluates the impact of the second series of Targeted Longer-Term Refinancing Operations (TLTRO2) on the amount of credit granted to non-financial private corporations and on the interest rates applied to loans in Italy, using data on credit transactions, bank and firm characteristics and a difference-in-differences approach. We find that TLTRO2 had a positive impact on the Italian credit market, encouraging medium-term lending to firms and reducing credit interest rates. While firms overall benefited from TLTRO2 irrespective of their risk category and size, we document heterogeneous treatment effects. Regarding firms’ risk category, the effects on credit quantities are larger for low-risk firms while those on credit interest rate are larger for high-risk firms. Regarding firms’ size, smaller firms benefited the most both in terms of amounts borrowed and interest rates. Furthermore, our evidence suggests that monetary policy transmission of TLTRO2 is stronger for banks with a low bad debt ratio in their balance sheets.

Keywords: Unconventional Monetary Policy; Pass-through; Policy Evaluation (search for similar items in EconPapers)
JEL-codes: E51 E52 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eur, nep-mac, nep-mon and nep-rmg
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1264_20

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