The Effect of Targeted Monetary Policy on Bank Lending
This paper studies the effect of central banks’ targeted refinancing operations on bank lending. It utilizes data from the European Central Bank’s targeted longer-term refinancing operations (TLTROs) together with monthly bank level balance sheet data from multiple countries. The effect of target...
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| Format: | Article |
| Language: | English |
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University of Warsaw
2021-06-01
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| Series: | Journal of Banking and Financial Economics |
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| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1029&context=jbfe |
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| _version_ | 1841564053260992512 |
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| author | Olli-Matti Laine |
| author_facet | Olli-Matti Laine |
| author_sort | Olli-Matti Laine |
| collection | DOAJ |
| description | This paper studies the effect of central banks’ targeted refinancing operations on bank lending.
It utilizes data from the European Central Bank’s targeted longer-term refinancing operations
(TLTROs) together with monthly bank level balance sheet data from multiple countries. The
effect of targeted policy is identified utilizing the institutional setting that provides natural
instrumental variables and a proxy for credit demand. Unlike previous papers, this paper studies
the effects on corporate loans and loans for consumption separately. The cumulative effect of
TLTROs on participating banks’ stock of corporate loans is estimated to be significant (about
20 per cent). However, the effect on lending for consumption is found close to zero. Furthermore,
the positive effects on corporate loans are found to be driven by crisis countries suggesting that
the effectiveness of monetary policy depends on the economic conditions. The paper also finds
some evidence that the effect on government bond purchases is negative. This result is very
different from the earlier results regarding non-targeted liquidity operations. |
| format | Article |
| id | doaj-art-d307b215baf84f848571046c1999cbf9 |
| institution | Kabale University |
| issn | 2353-6845 |
| language | English |
| publishDate | 2021-06-01 |
| publisher | University of Warsaw |
| record_format | Article |
| series | Journal of Banking and Financial Economics |
| spelling | doaj-art-d307b215baf84f848571046c1999cbf92025-01-02T23:18:05ZengUniversity of WarsawJournal of Banking and Financial Economics2353-68452021-06-0120211(15)254310.7172/2353-6845.jbfe.2021.1.3The Effect of Targeted Monetary Policy on Bank LendingOlli-Matti Laine0https://orcid.org/0000-0002-2983-4135Bank of Finland and Tampere University, FinlandThis paper studies the effect of central banks’ targeted refinancing operations on bank lending. It utilizes data from the European Central Bank’s targeted longer-term refinancing operations (TLTROs) together with monthly bank level balance sheet data from multiple countries. The effect of targeted policy is identified utilizing the institutional setting that provides natural instrumental variables and a proxy for credit demand. Unlike previous papers, this paper studies the effects on corporate loans and loans for consumption separately. The cumulative effect of TLTROs on participating banks’ stock of corporate loans is estimated to be significant (about 20 per cent). However, the effect on lending for consumption is found close to zero. Furthermore, the positive effects on corporate loans are found to be driven by crisis countries suggesting that the effectiveness of monetary policy depends on the economic conditions. The paper also finds some evidence that the effect on government bond purchases is negative. This result is very different from the earlier results regarding non-targeted liquidity operations.https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1029&context=jbfeunconventional monetary policycredit supplytltrobank lending |
| spellingShingle | Olli-Matti Laine The Effect of Targeted Monetary Policy on Bank Lending Journal of Banking and Financial Economics unconventional monetary policy credit supply tltro bank lending |
| title | The Effect of Targeted Monetary Policy on Bank Lending |
| title_full | The Effect of Targeted Monetary Policy on Bank Lending |
| title_fullStr | The Effect of Targeted Monetary Policy on Bank Lending |
| title_full_unstemmed | The Effect of Targeted Monetary Policy on Bank Lending |
| title_short | The Effect of Targeted Monetary Policy on Bank Lending |
| title_sort | effect of targeted monetary policy on bank lending |
| topic | unconventional monetary policy credit supply tltro bank lending |
| url | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1029&context=jbfe |
| work_keys_str_mv | AT ollimattilaine theeffectoftargetedmonetarypolicyonbanklending AT ollimattilaine effectoftargetedmonetarypolicyonbanklending |