Financial Intermediation Through Financial Disintermediation: Evidence from the ECB Corporate Sector Purchase Programme
72 Pages Posted: 16 Jun 2018 Last revised: 3 Mar 2020
Date Written: February 27, 2020
We study the spillover effects of financial disintermediation on the supply of credit to small and medium enterprises (SMEs). We find that direct central bank lending to large corporations induces banks to increase lending to SMEs by 8 to 12 percent. This effect is stronger for liquidity-constrained banks. SMEs with relationship banks affected by disintermediation borrow approximately €77,750 more relative to SMEs in the same country and industry. We verify that these inferences are not due to changing economic fundamentals, demand from SMEs, or selection in central bank financing. Despite documenting positive effects, we also find that they disappear in the long term, casting some doubt on the structural efficacy of financial disintermediation as a tool to enhance bank lending to SMEs.
Keywords: small businesses; credit supply; economic growth; monetary policy; real effects
JEL Classification: E52; E58; E65; G21; G28
Suggested Citation: Suggested Citation