To lend or not to lend? The ECB as the ‘intermediary of last resort’

Aurore Burietz and Matthieu Picault

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Abstract: We investigate the effectiveness of the bank lending channel, that is, whether, and if so how, the accommodative monetary policies of the European Central Bank (ECB) mitigated the disruption in bank lending between 2008 and 2014. We show that both standard and non-standard measures of the ECB's monetary policy alleviated banks' funding constraints, helping support their lending activities in the syndicated loan market. We highlight a cross-sectional asymmetry in banks' responses to both measures based on their size, funding constraints, and financial strength. After the 2008 shock, the standard measures reached their limits, highlighting the need to develop new monetary policy tools to support the lending activities of banks that needed it the most, i.e., that are small and financially constrained. As such, we show that the ECB was successful in doing so, with the implementation of non-standard tools significantly supporting the loan offer of these banks after the crisis.

Date: 2023-05
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Published in Economic Modelling, 2023, 122, pp.106228. ⟨10.1016/j.econmod.2023.106228⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04130899

DOI: 10.1016/j.econmod.2023.106228

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