Discussion paper

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

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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Citation

Delatte, A, and J Imbs (eds) (2019), “DP13693 The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France”, CEPR Press Discussion Paper No. 13693. https://cepr.org/publications/dp13693