Firms’ expectations on the availability of credit since the financial crisis

Annalisa Ferrando, Ioannis Ganoulis and Carsten Preuss

No 2341, Working Paper Series from European Central Bank

Abstract: Using a large set of firm-level survey data from the euro area since 2009, we analyse how firms use their information to form expectations on the availability of bank finance. Our results suggest that firms update what otherwise look like adaptive expectations on the basis of the latest information in their information set. As in the previous literature, the hypothesis that expectations fulfil the (orthogonality) conditions of the rational expectations hypothesis is rejected by the data. We find evidence that this is not only due to information imperfections but also to some type of misspecification of the expectations’ model that firms are using. In addition, we find some evidence that companies that have not used bank finance recently tend to do worse at forecasting its availability next period. To test how policy announcements may affect expectations, we concentrate on the possible effects of the ECB policy announcements of summer 2012, which included among other things the announcement of the European Central Bank’s Outright Monetary Transactions Program (OMT). Using a difference-in-differences approach, we find evidence of forward-looking expectations. In particular, shortly after the OMT announcement the forecast of “informed” firms were more upbeat compared to the control group of firms. This moreover was true in both vulnerable and non-vulnerable countries, suggesting that it was the relevance of the information about the future of the banking system that most mattered for expectations at the time, more than the immediate impact of the announced policy measures. JEL Classification: C83, D22, D84

Keywords: expectation formation; policy announcements and survey data (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: 235236
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2341~2c5a6a205f.en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20192341

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().