Bank loan supply shocks and alternative financing of non‐financial corporations in the euro area

Abstract

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To sign or not to sign? On the response of prices to financial and uncertainty shocks

“…In contrast, the empirical results byGrimme (2017) suggest that the lending rate increases, while the spread tends to decrease after an exogenous reduction in uncertainty. For this reason, we prefer to impose the sign restrictions on the spread.6 The rationale for disentangling financial and uncertainty shocks is reminiscent of the approach applied by Caldara, Fuentes-Albero,Gilchrist, and Zakrajŝek (2016).7 In order to be able to restrict the relative responses, both series are normalized to have the same first and second moments.8 We also impose signs on the residual shock to ensure that it does not act like any other structural disturbance in the system.9 As regards the identification of a financial shock, such a strategy has also been followed byMandler and Scharnagl (2018).…”

Estimating the Effects of the Eurosystem's Asset Purchase Programme at the Country Level

“…Bank loans are notional stocks constructed from data on loan flows, which have been adjusted for nontransaction related changes in stocks, such as statistical reclassifications or securitisations.10 Caldara and Herbst (2019) show for the U.S. credit spreads, such as the excess bond premium being important in modelling the monetary policy reaction function in a VAR model. Although corporate bonds account for less than 10% of overall external financing of non-financial corporations in the Euro area (seeMandler and Scharnagl, 2019) we include this variable as it might contain important information about macroeconomic risk.…”