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Unconventional Monetary Policy and Bank Lending Relationships

Christophe Cahn (), Anne Duquerroy () and William Mullins
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William Mullins: UC San Diego

No vgk25, SocArXiv from Center for Open Science

Abstract: We explore how banks transmit central bank liquidity injections using unique variation in the ECB’s 2011-12 Very Long-Term Refinancing Operations (VLTROs) which affected lending to firms discontinuously across credit ratings (i.e., within banks). We show that banks transmit liquidity differently to multi-bank firms than to firms with only one bank. Single-bank firms receive longer-term relationship lending and increase investment, while multi-bank firms receive short-term transactions-style lending only. Policy effects are attributable to increasing the maturity of bank borrowing from the ECB in combination with allowing banks to use loans to firms as collateral for such borrowing.

Date: 2017-05-18
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:vgk25

DOI: 10.31219/osf.io/vgk25

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