The bank lending channel of conventional and unconventional monetary policy

Ugo Albertazzi, Andrea Nobili and Federico Signoretti

No 1094, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Using a new monthly dataset on bank-level lending rates, we study the transmission of conventional and unconventional monetary policy in the euro area via shifts in the supply of credit. We find that a bank lending channel is operational for both types of measures, though its functioning differs: for standard operations the transmission is weaker for banks with more capital and a more solid funding structure, in line with an important role of asymmetric information. However, in response to non-standard measures lending supply expands by more at banks with stronger capital and funding positions, suggesting a crucial role for regulatory and economic constraints. We also find that the transmission of unconventional measures is attenuated by their negative effect on future bank’s capital position via the net interest income (reverse bank capital channel). Finally, we find that large sovereign exposures mute the response of lending rates to conventional policy, but amplify the transmission of unconventional measures.

Keywords: unconventional monetary policy; lending rates; bank lending channel; bank capital channel; fragmentation (search for similar items in EconPapers)
JEL-codes: E30 E32 E51 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: The Bank Lending Channel of Conventional and Unconventional Monetary Policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1094_16

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