Monetary policy at work: Security and credit application registers evidence

Jose-Luis Peydro, Andrea Polo and Enrico Sette

Journal of Financial Economics, 2021, vol. 140, issue 3, 789-814

Abstract: Monetary policy transmission may be impaired if banks rebalance their portfolios toward securities. We identify the bank lending and risk-taking channels of monetary policy by exploiting—Italy's unique—credit and security registers. In crisis times, with higher central bank liquidity, less capitalized banks react by increasing securities over credit supply, inducing worse firm-level real effects. However, they buy securities with lower yields and haircuts. Unlike in crisis times, in precrisis times, securities do not crowd out credit supply. The substitution from lending to securities in crisis times helps less capitalized banks repair their balance sheets and restart credit supply with a one-year lag.

Keywords: Securities; Credit supply; Bank capital; Monetary policy; Reach for yield (search for similar items in EconPapers)
JEL-codes: E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Monetary Policy at Work: Security and Credit Application Registers Evidence (2020)
Working Paper: Monetary policy at work: Security and credit application registers evidence (2018)
Working Paper: Monetary policy at work: Security and credit application registers evidence (2017)
Working Paper: Monetary Policy at Work: Security and Credit Application Registers Evidence (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:140:y:2021:i:3:p:789-814

DOI: 10.1016/j.jfineco.2021.01.008

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