Credit Supply and Demand in Unconventional Times

Carlo Altavilla, Miguel Boucinha, Sarah Holton and Steven Ongena

Journal of Money, Credit and Banking, 2021, vol. 53, issue 8, 2071-2098

Abstract: Do borrowers demand less credit from banks with weak balance sheets, following monetary policy shocks? To answer this, we use novel bank‐specific survey data matched with balance sheet information for euro area banks. We find that, following a monetary policy shock, bank strength influences credit demand as well as credit supply. Bank resilience is important for firms when selecting a lender and it is therefore vital to control for bank‐specific demand when identifying credit supply shocks. An application using bank‐specific demand shows that—even after fully controlling for demand, borrower quality, and bank strength—unconventional monetary policies stimulate loan supply.

Date: 2021
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https://doi.org/10.1111/jmcb.12792

Related works:
Working Paper: Credit supply and demand in unconventional times (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:53:y:2021:i:8:p:2071-2098

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