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Title: The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France

Author(s): Anne-Laure Delatte, Pranav Garg and Jean Imbs

Publication Date: April 2019

Keyword(s): Corporate Finance, individual data, Real Effects Of Monetary Policy, Transmission Channels and Unconventional Monetary Policy

Programme Area(s): Financial Economics and International Macroeconomics and Finance

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.

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Bibliographic Reference

Delatte, A, Garg, P and Imbs, J. 2019. 'The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13693