What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19

Divya Kirti, Maria Martinez Peria, Prachi Mishra and Jan Strasky

No 2023/025, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the impact of fiscal, monetary, and prudential policies during the COVID-19 pandemic on bank lending across a broad sample of countries. We combine a comprehensive announcementlevel dataset of policy actions with bank and firm-level information to analyze the effectiveness of different types of policies. We document that different types of policies were introduced together and hence accounting for policy combinations, or packages, is crucial. Lending grew faster at banks in countries that announced packages combining fiscal, monetary, and prudential measures relative to those that relied on some, but not all, policy dimensions. Within packages including all three types of policy measures, banks in countries with more and larger measures saw faster loan growth. The impact was larger among more constrained banks with low equity levels. Large packages combining fiscal, monetary and prudential policies also increased liquidity for bank dependent firms, but did not disproportionately benefit unviable firms.

Keywords: COVID-19; policy packages; policy effectiveness; bank lending; IMF working paper research Department; policy combination; policy package; prudential policy; Bank credit; Credit; Loans; Global (search for similar items in EconPapers)
Pages: 41
Date: 2023-02-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-fdg
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Working Paper: What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19 (2023)
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