Unconventional monetary policy, funding expectations, and firm decisions

Annalisa Ferrando, Alexander Popov and Gregory F. Udell

European Economic Review, 2022, vol. 149, issue C

Abstract: We study the transmission of (unconventional) monetary policy to the real sector when firm decisions depend on both current and future credit market conditions. For a given level of current credit access, investment and employment increase more for firms expecting bank credit to improve in the future. Three separate unconventional policies by the ECB – the OMT, the introduction of negative rates, and the CSPP – improved expectations of future credit access for SMEs borrowing from banks that were expected to increase SME lending due to the policy. Our results enhance our understanding of the bank balance sheet channel of monetary policy.

Keywords: Unconventional monetary policy; Funding expectations; Corporate investment (search for similar items in EconPapers)
JEL-codes: D22 D84 E58 G21 H63 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Unconventional monetary policy, funding expectations, and firm decisions (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:149:y:2022:i:c:s001429212200157x

DOI: 10.1016/j.euroecorev.2022.104268

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