06 Jun 2017

The Transmission Mechanism of Credit Support Policies in the Euro Area

Jef Boeckx / Maite De Sola Perea / Gert Peersman

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ECMI Working Paper No. 3 / June 2017

In this ECMI Working Paper, the authors use a sample of 131 banks and find that the credit support policies of the Eurosystem (i.e. the ECB and the national central banks) have been successful in stimulating bank credit to the private sector. The impact appears to have been greater on the loan supply of smaller, less liquid, less capitalised banks and those more dependent on wholesale funding. The role of bank capital is, however, ambiguous. Besides the abovementioned favourable direct effect on loan supply, lower levels of bank capitalisation also mitigate the size, retail and liquidity effects of these policies. The low capital drag on the other channels was even dominant during the sample period.

JEL classifcation: E51, E52, E58, G01, G21

Keywords: unconventional monetary policy, bank lending, monetary transmission mechanism

Jef Boeckx and Maite De Sola Perea are Economists at the Research Department of the National Bank of Belgium; Gert Peersman is Professor of Economics at the Department of Financial Economics at Ghent University.

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of ECMI or CEPS. Available for free downloading from the CEPS website (www.ceps.eu) © CEPS 2017, Jef Boeckx, Maite De Sola Perea, Gert Peersman. All rights reserved.