Mending the broken link: heterogeneous bank lending and monetary policy pass-through

Carlo Altavilla, Fabio Canova and Matteo Ciccarelli

No 1978, Working Paper Series from European Central Bank

Abstract: We analyse the pass-through of monetary policy measures to lending rates to firms and households in the euro area using a unique bank-level dataset. Bank balance sheet characteristics such as the capital ratio and the exposure to sovereign debt are responsible for the heterogeneity of pass-through of conventional monetary policy changes. The location of a bank is instead irrelevant. Non-standard measures normalized the capacity of banks to grant loans resulting in a significant compression in lending rates. Banks with a high level of non-performing loans and a low capital ratio were the most responsive to the measures. Finally, we quantify the effects of non-standard policies on the real economic activity using a standard macroeconomic model and find that in absence of these measures both inflation and output would have been significantly lower. JEL Classification: C3, E4, E5, G2

Keywords: bank balance sheet characteristics; monetary policy pass-through (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: 2279334
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Citations: View citations in EconPapers (44)

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Related works:
Working Paper: Mending the broken link: heterogeneous bank lending and monetary policy pass-through (2016)
Working Paper: Mending the broken link: heterogeneous bank lending and monetary policy pass-through (2016)
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