The real effects of monetary policy transmission via the floating-rate channel

Margherita Bottero (), Michele Cascarano (), Alessandro Modica () and Federico Maria Signoretti ()
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Margherita Bottero: Bank of Italy
Michele Cascarano: Bank of Italy
Alessandro Modica: Bank of Italy
Federico Maria Signoretti: Bank of Italy

No 1536, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we quantify the transmission of the 2022-23 tightening cycle to euro-area firms through the floating-rate channel, that is, via their heterogeneous exposure to the repricing of outstanding bank debt. As firms' exposure to floating-rate loans is not exogenous, we instrument it with the random exposure of their lenders to the inflow of retail deposits ensuing from the ECB's Asset Purchase Programme, which affected intermediaries' propensity to lend at floating rates. According to our estimates, an increase of 450 basis points in the 3-month Euribor rate (as observed in 2022-23) would have reduced the investment rate of companies with a high share of floating-rate debt (in or above the 75th percentile) by 14.8 percentage points more than for those with fixed-rate debt only. This effect compares with an average investment rate in the sample of 14 per cent.

Keywords: bank lending; floating-rate loans; monetary policy transmission; investment dynamics (search for similar items in EconPapers)
JEL-codes: D22 E44 E52 G32 (search for similar items in EconPapers)
Date: 2026-06
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