The transmission of monetary policy through credit standards: evidence on loan application discouragement in the euro area

Georgios Mermelas and Athanasios Tagkalakis
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Georgios Mermelas: University of Patras
Athanasios Tagkalakis: Bank of Greece and University of Patras

No 362, Working Papers from Bank of Greece

Abstract: This study examines the impact of monetary policy and its announcements on firms’ loan application discouragement, operating through changes in credit standards. We merge firm-level data from the Survey on the Access to Finance of Enterprises (SAFE) with bank-level data from the Bank Lending Survey (BLS) for twenty-euro area countries, covering the period from the first half of 2009 to the second half of 2024. The findings indicate that, following a monetary policy–induced tightening of credit standards, firms with higher turnover, stronger credit records and more stable balance sheets exhibit a lower propensity to become discouraged from applying for loans. Conversely, firms with weaker characteristics are more adversely affected. Importantly, these effects persist even when the analysis is restricted to firms with a very low probability of loan rejection, indicating that monetary policy induces a self-restriction mechanism that operates in addition to the traditional credit supply channel.

Keywords: Monetary Policy; Euro Area; Firm Heterogeneity; Monetary Policy Transmission; Firms’ Discouragement; Credit Standards (search for similar items in EconPapers)
JEL-codes: D22 E44 E52 E58 G21 L25 (search for similar items in EconPapers)
Pages: 57
Date: 2026-05
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