Monetary Policy Shocks and Firms’ Bank Loan Expectations

41 Pages Posted: 3 Aug 2023

See all articles by Annalisa Ferrando

Annalisa Ferrando

European Central Bank (ECB)

Caterina Forti Grazzini

European Central Bank (ECB)

Date Written: August, 2023

Abstract

We provide new evidence on how ECB’s monetary policy decisions affect firms’ bank loan expectations in the euro area. We use firm-level data derived from the ECB Survey on the Access to Finance of Enterprises for the period 2009 to 2022 and identify the impact of monetary policy by comparing the responses of firms interviewed shortly before and after monetary policy shocks. Our results are as follows. First, we find that firms’ bank loan expectations react to monetary policy, with a contractionary shock leading to a downward revision of expectations. Second, we show that firms’ response depends on the size and the sign of the shock, with only large and contractionary shocks having a significant negative effect on expectations. Third, we observe that the different components of central bank communication (i.e. the pure monetary policy shock and the central bank information shock) have different impacts on firms’ beliefs. Fourth, we find that conventional and unconventional QE shocks have opposite effects on expectations, with the impact of QE policies mainly being driven by the central bank information component of the related announcements. Finally, we document that the response to monetary policy differs along firms’ structural characteristics.

Keywords: firms’ expectations, monetary policy, survey data

JEL Classification: C83, D22, D84, E58

Suggested Citation

Ferrando, Annalisa and Grazzini, Caterina Forti, Monetary Policy Shocks and Firms’ Bank Loan Expectations (August, 2023). ECB Working Paper No. 2023/2838, Available at SSRN: https://ssrn.com/abstract=4529826 or http://dx.doi.org/10.2139/ssrn.4529826

Annalisa Ferrando (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Caterina Forti Grazzini

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
84
Abstract Views
318
Rank
596,611
PlumX Metrics