DP13693 The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France

Author(s):	Anne-Laure Delatte, Pranav Garg, Jean Imbs
Publication Date:	April 2019
Date Revised:	May 2019
Keyword(s):	Corporate Finance, individual data, Real Effects Of Monetary Policy, Transmission Channels, Unconventional Monetary Policy
JEL(s):	C55, C58, E44, E52, E58, G21, G28, G30, G32
Programme Areas:	Financial Economics, International Macroeconomics and Finance
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13693

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.