Unconventional monetary policy, funding expectations, and firm decisions

Annalisa Ferrando, Alexander Popov and Gregory F. Udell

No 2598, Working Paper Series from European Central Bank

Abstract: We study the transmission of (unconventional) monetary policy to the real sector when firm decisions depend on both current and future credit market conditions. For a given level of current credit access, investment and employment increases more at firms expecting bank credit to improve in the future. Three separate unconventional policies by the ECB—the OMT, the introduction of negative rates, and the CSPP—improved expectations of future credit access for SMEs borrowing from banks that were expected to increase SME lending due to the policy. Our results enhance our understanding of the bank balance sheet channel of monetary policy. JEL Classification: D22, D84, E58, G21, H63

Keywords: corporate investment; funding expectations; Unconventional monetary policy (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
Note: 235236
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Journal Article: Unconventional monetary policy, funding expectations, and firm decisions (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212598

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