DP15539 Monetary and Macroprudential Policy Complementarities: evidence from European credit registers

Author(s): Carlo Altavilla, Luc Laeven, José Luis Peydró
Publication Date: December 2020
Keyword(s): E51, E52, E58, G21, G28
JEL(s): E51, E52, E58, G21, G28
Programme Areas: Financial Economics, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15539

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.