What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19

Divya Kirti, Martínez Pería, Maria Soledad, Prachi Mishra and Stráský, Jan

No 17880, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyzes the impact of fiscal, monetary, and prudential policies during the COVID-19 pandemic on bank lending across a broad sample of countries. We combine a comprehensive announcement-level dataset of policy actions with bank and firm-level information to analyze the effectiveness of different types of policies. We document that different types of policies were introduced together and hence accounting for policy combinations, or packages, is crucial. Lending grew faster at banks in countries that announced packages combining fiscal, monetary, and prudential measures relative to those that relied on some, but not all, policy dimensions. Within packages including all three types of policy measures, banks in countries with more and larger measures saw faster loan growth. The impact was larger among more constrained banks with low equity levels. Large packages combining fiscal, monetary and prudential policies also increased liquidity for bank dependent firms, but did not disproportionately benefit unviable firms.

Keywords: COVID-19 (search for similar items in EconPapers)
JEL-codes: E52 E58 E62 G21 G28 (search for similar items in EconPapers)
Date: 2023-02
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Working Paper: What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19 (2023)
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