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Making room for the needy: the credit-reallocation effects of the ECB’s corporate QE

Óscar Arce, (), Ricardo Gimeno and Sergio Mayordomo ()
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Óscar Arce,: Banco de España

No 1743, Working Papers from Banco de España, Working Papers Homepage

Abstract: We analyse how the European Central Bank’s purchases of corporate bonds under its Corporate Sector Purchase Programme (CSPP) affected the financing of Spanish nonfinancial firms. Our results show that the announcement of the CSPP in March 2016 significantly raised firms’ propensity to issue CSPP-eligible bonds. The flipside was a drop in the demand for bank loans by these firms. This drop in the demand for credit by bondissuers, which are usually large corporations, unchained a positive and significant side effect on the flow of new loans extended to – typically smaller – firms that do not issue bonds. Specifically, we find that around 78% of the drop in loans previously given to bond issuers was redirected to other companies, which led them to raise investment. This reallocation of credit was amplified by the ECB’s Targeted Longer Term Refinancing Operations (TLTRO).

Keywords: unconventional monetary policy; Corporate Sector Purchase Programme; quantitative easing; portfolio rebalancing (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G2 G12 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
Date: 2017-12
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1743

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