Monetary and Macroprudential Policy Complementarities: Evidence from European Credit Registers

61 Pages Posted: 16 Dec 2020

See all articles by Carlo Altavilla

Carlo Altavilla

European Central Bank (ECB)

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

José-Luis Peydró

Catalan Institution of Research and Advanced Studies (ICREA)

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Date Written: December, 2020

Abstract

We document that there are strong complementarities between monetary policy and macroprudential policy in shaping the evolution of bank credit. We use a unique loan-level dataset comprising multiple credit registers from several European countries and different types of loans, including corporate loans, mortgages and consumer credit. We merge this rich information with borrower and bank-level characteristics and with indicators summarising macroprudential and monetary policy actions. We find that monetary policy easing increases both bank lending and lending to riskier borrowers, especially when there is a more accommodative macroprudential environment. These effects are stronger for less capitalised banks. Results apply to both household and firm lending, but they are stronger for consumer and corporate loans than for mortgages. Finally, for firms, the overall increase in bank lending induced by an accommodative policy mix is stronger for more (ex ante) productive firms than firms with high ex ante credit risk, except for banks with low capital.

JEL Classification: E51, E52, E58, G21, G28

Suggested Citation

Altavilla, Carlo and Laeven, Luc A. and Peydró, José-Luis, Monetary and Macroprudential Policy Complementarities: Evidence from European Credit Registers (December, 2020). ECB Working Paper No. 20202504, Available at SSRN: https://ssrn.com/abstract=3750006

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

José-Luis Peydró

Catalan Institution of Research and Advanced Studies (ICREA) ( email )

P/ Lluis Companys 23
Barcelona, 08010
Spain

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