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The Transmission Mechanism of Credit Support Policies in the Euro Area

Jef Boeckx (), Maite De Sola Perea and Gert Peersman ()

No 6442, CESifo Working Paper Series from CESifo Group Munich

Abstract: We use an original monthly dataset of 131 individual euro area banks to examine the effectiveness and transmission mechanism of the Eurosystem’s credit support policies since the start of the crisis. First, we show that these policies have indeed been succesful in stimulating the credit flow of banks to the private sector. Second, we find support for the “bank lending view” of monetary transmission. Specifically, the policies have had a greater impact on loan supply of banks that are more constrained to obtain unsecured external funding, i.e. small banks (size effect), banks with less liquid balance sheets (liquidity effect), banks that depend more on wholesale funding (retail effect) and low-capitalized banks (capital effect). The role of bank capital is, however, ambiguous. Besides the above favorable direct effect on loan supply, lower levels of bank capitalization at the same time mitigate the size, retail and liquidity effects of the policies. The drag on the other channels has even been dominant during the sample period, i.e. better capitalized banks have on average responded more to the credit support policies of the Eurosystem as a result of more favourable size, retail and liquidity effects.

Keywords: unconventional monetary policy; bank lending; monetary transmission mechanism (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cta, nep-eec, nep-mac and nep-mon
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Working Paper: The Transmission Mechanism of Credit Support Policies in the Euro Area (2017) Downloads
Working Paper: The transmission mechanism of credit support policies in the Euro Area (2016) Downloads
Working Paper: THE TRANSMISSION MECHANISM OF CREDIT SUPPORT POLICIES IN THE EURO AREA (2016) Downloads
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