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Doubling Down: The Synergy of CCyB Release and Monetary Policy Easing

Cristina Jude and Grégory Levieuge

Working papers from Banque de France

Abstract: At the height of the COVID-19 crisis, many countries have reduced their countercyclical capital buffer (CCyB) and cut key policy rates. We exploit this quasi-natural experiment to gauge the combined effects of these two policies on bank lending rates (BLRs). First, we theoretically show that the joint action of CCyB release and monetary policy easing lowers BLRs by more than the sum of their individual effects. We then empirically confirm this synergy by a difference-in-difference analysis. Notably, for a one percentage point release of the CCyB, corporate BLRs decreased by around 11 basis points more compared to countries without CCyB relief.

Keywords: Countercyclical Capital Buffer; Monetary Policy; Policy Complementarity; Lending Rates; Covid-19 (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 G28 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2024
New Economics Papers: this item is included in nep-cba, nep-ene, nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:961

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