Financial Intermediation Through Financial Disintermediation: Evidence from the ECB Corporate Sector Purchase Programme

72 Pages Posted: 16 Jun 2018 Last revised: 19 Aug 2020

See all articles by Aytekin Ertan

Aytekin Ertan

London Business School

Anya Kleymenova

Federal Reserve Board of Governors

Marcel Tuijn

Southern Methodist University (SMU); Erasmus University Rotterdam (EUR)

Date Written: August 18, 2020

Abstract

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. SMEs use these funds to invest in real activities and increase employment. We verify that our 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 once new liquidity injections stop and the policy reaches a steady state. Our findings provide some insights on the ability of this macroeconomic policy tool to increase employment during the ongoing COVID-19 pandemic through financial disintermediation serving as an additional channel to provide access to financing for SMEs.

Keywords: small businesses; credit supply; economic growth; economic uncertainty; monetary policy; real effects

JEL Classification: E52; E58; E65; G21; G28

Suggested Citation

Ertan, Aytekin and Kleymenova, Anya V. and Tuijn, Marcel, Financial Intermediation Through Financial Disintermediation: Evidence from the ECB Corporate Sector Purchase Programme (August 18, 2020). Fama-Miller Working Paper , Chicago Booth Research Paper No. 18-06, Available at SSRN: https://ssrn.com/abstract=3197214 or http://dx.doi.org/10.2139/ssrn.3197214

Aytekin Ertan

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
442070008131 (Phone)

Anya V. Kleymenova (Contact Author)

Federal Reserve Board of Governors ( email )

20th and C Streets NW
Washington, DC 20551
United States
202-452-2662 (Phone)

Marcel Tuijn

Southern Methodist University (SMU)

6212 Bishop Blvd.
Dallas, TX 75275
United States

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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