The Transmission Channels of Unconventional Monetary Policy: Evidence from a Change in Collateral Requirements in France

27 Pages Posted: 30 Apr 2019 Last revised: 7 May 2019

See all articles by Anne Laure Delatte

Anne Laure Delatte

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Jean M. Imbs

Paris School of Economics (PSE); NYU Abu Dhabi; Centre for Economic Policy Research (CEPR)

Pranav Garg

Government of India - Reserve Bank of India

Date Written: April 2019

Abstract

Using a bank-firm level credit registry combined with firm-level balance sheet data we establish the presence of heterogeneity in the effects of unconventional monetary policy transmission. We examine the consequences of a loosening in the collateral eligibility requirement for credit refinancing in France. The policy was designed to affect bank lending positively. We expect a linear increase in lending and an additional increase in loans to firms with newly acceptable rating. We find a large heterogeneity of the monetary policy transmission including the unexpected reduction of lending by the banks benefiting the most from the policy. These are small, risk-averse banks whose foremost concern after the recession was to strengthen their balance sheets. Banks least affected by the policy respond with a reduction in credit to low risk borrowers in reaction to the change in the market structure. Last we document heterogenous effects of the policy on firms depending on their size.

Keywords: Corporate Finance, individual data, Real Effects Of Monetary Policy, Transmission Channels, Unconventional Monetary Policy

JEL Classification: C55, C58, E44, E52, E58, G21, G28, G30, G32

Suggested Citation

Delatte, Anne Laure and Imbs, Jean M. and Imbs, Jean M. and Garg, Pranav, The Transmission Channels of Unconventional Monetary Policy: Evidence from a Change in Collateral Requirements in France (April 2019). CEPR Discussion Paper No. DP13693, Available at SSRN: https://ssrn.com/abstract=3379608

Anne Laure Delatte (Contact Author)

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Jean M. Imbs

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

NYU Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pranav Garg

Government of India - Reserve Bank of India ( email )

Bakery Junction Service Road
Vazhuthacaud
Thiruvananthapuram, Kerala 695033
India

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