Unconventional Monetary Policy and Bank Lending Relationships

69 Pages Posted: 3 Jan 2018

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

Date Written: December 1, 2017

Abstract

How to support private lending to firms in recessions is a major open question. This paper uses an unexpected change in the collateral framework of the European Central Bank that reduced the cost of funding loans to a subset of firms in France in 2012, to examine how bank adjust their corporate lending portfolio in a downturn. It provides causal evidence that targeted unconventional monetary policy can be an effective lever to increase private credit and reduce contagion of financial distress. The effect is strongly driven by firms with only a single bank relationship, especially less risky borrowers with information intensive banking relationships.

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

JEL Classification: E52, G21, G30

Suggested Citation

Cahn, Christophe and Duquerroy, Anne and Mullins, William, Unconventional Monetary Policy and Bank Lending Relationships (December 1, 2017). Banque de France Working Paper No. 659. Available at SSRN: https://ssrn.com/abstract=3095527 or http://dx.doi.org/10.2139/ssrn.3095527

Christophe Cahn (Contact Author)

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

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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