Monetary Policy Without a Bank Lending Channel

53 Pages Posted: 19 Jun 2017  

Benjamin Grosse-Rueschkamp

ESMT European School of Management and Technology

Sascha Steffen

University of Mannheim - Business School; Centre for European Economic Research (ZEW)

Daniel Streitz

E.CA Economics

Date Written: June 17, 2017

Abstract

The European Central Bank’s Corporate Sector Purchase Programme (CSPP), launched in June 2016, increased the supply of capital for eligible Eurozone firms through direct corporate bond purchases. Using a difference-in-difference framework, we show that the CSPP reduces financial constraints for eligible firms. These firms increase their leverage, which is driven by an increase in bond debt. In contrast, average bank debt does not change. Constrained firms with a low investment grade rating issue relatively more bond debt compared to high investment grade-rated firms. Importantly, low investment grade-rated firms increase their capital expenditures following the CSPP announcement. High investment grade-rated firms, on the other hand, increase acquisitions and use some of these funds to repurchase shares. Our results highlight possible distortions due to asset purchases by central banks.

Keywords: CSPP, ECB, financial constraints, bond debt, real effects

JEL Classification: G01, G21, G28

Suggested Citation

Grosse-Rueschkamp, Benjamin and Steffen, Sascha and Streitz, Daniel, Monetary Policy Without a Bank Lending Channel (June 17, 2017). Available at SSRN: https://ssrn.com/abstract=2988158

Benjamin Grosse-Rueschkamp

ESMT European School of Management and Technology ( email )

Schlossplatz 1
10117 Berlin
Germany

Sascha Steffen (Contact Author)

University of Mannheim - Business School ( email )

L9, 1-2
Mannheim, 68131
Germany

HOME PAGE: http://www.sascha-steffen.de

Centre for European Economic Research (ZEW) ( email )

L7, 1
Mannheim, 68161
Germany
+496211235140 (Phone)

Daniel Streitz

E.CA Economics ( email )

Schlossplatz 1
Berlin, 10178
Germany

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