Unconventional Monetary Policy and Bank Lending Relationships

70 Pages Posted: 18 May 2017 Last revised: 9 Jun 2020

See all articles by Christophe Cahn

Christophe Cahn

Banque de France - Direction des Entreprises

Anne Duquerroy

Banque de France

William Mullins

University of California, San Diego (UCSD) - Rady School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2020

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.

Keywords: Unconventional Monetary Policy, Relationship Banking, SME Finance, Bank Lending, Collateral

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

Suggested Citation

Cahn, Christophe and Duquerroy, Anne and Mullins, William, Unconventional Monetary Policy and Bank Lending Relationships (May 12, 2020). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC. Available at SSRN: https://ssrn.com/abstract=2970199 or http://dx.doi.org/10.2139/ssrn.2970199

Christophe Cahn

Banque de France - Direction des Entreprises ( email )

39 rue Croix des Petits Champs
Paris Cedex 01 75049
France

Anne Duquerroy

Banque de France ( email )

Paris
France

William Mullins (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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