The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK

Leo de Haan and Elmer Sterken

The European Journal of Finance, 2006, vol. 12, issue 5, 401-420

Abstract: According to the 'broad credit view' bank-dependent firms are more strongly affected by monetary contractions than firms with access to non-bank forms of external finance. Within the credit view the bank lending channel focuses on the special role of bank loans, and predicts that monetary contractions reduce loan supply to firms facing information problems. However, the 'relationship lending channel' argues that, especially in bank-based economies, bank-dependent firms have close ties with banks, which may reduce the sensitivity of their use of bank debt to monetary shocks. The sensitivity of corporate debt structures to changes in the monetary policy stance is analysed using a sample of 22,000 firms in the Euro area and the UK. Evidence is found for the credit view, the relationship lending channel, but not for the bank lending channel.

Keywords: Broad credit view; bank lending channel; relationship lending; monetary policy (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (27)

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Working Paper: Corporate governance, relationship lending and monetary lending monetary policy: firm-level evidence for the Euro area (2002)
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DOI: 10.1080/13518470500459840

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