Unconventional Monetary Policy Transmission and Bank Lending Relationships

Cahn, Christophe; Duquerroy, Anne; Mullins, William

doi:10.31235/osf.io/vgk25

Cited by 19 publications

(21 citation statements)

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“…While other policy measures in the Euro Area were implemented at the same time, the ACC programme is the only programme that generated a difference between firms rated 4 (the treated group) and firms rated 5 + (the control group) within category B (see Cahn et al . () and Mesonnier et al . () for recent studies using the ACC programme as a quasi‐natural experiment).…”

Section: Firm‐level Resultsmentioning

confidence: 85%

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Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth

et al. 2018

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We identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovationbased growth with credit constraints, where the above two counteracting effects generate an inverted-U relationship between credit access and productivity growth. Then we test our theory on a comprehensive French manufacturing firm-level dataset. We first show evidence of an inverted-U relationship between credit constraints and productivity growth when we aggregate our data at the sectoral level. We then move to firm-level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experience lower exit rates, particularly the least productive firms among them. To support these findings, we exploit the 2012 Eurosystem's Additional Credit Claims programme as a quasi-experiment that generated an exogenous extra supply of credits for a subset of incumbent firms.

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Section: Firm‐level Resultsmentioning

confidence: 85%

“…This is because, as argued by Cahn et al . (), the ACC programme also had positive effects on firms whose loans were already eligible to be pledged as collateral.…”

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confidence: 99%

Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth

et al. 2018

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“…There are also several papers that investigate the effects of unconventional monetary policy in Europe (see, e.g.,Acharya et al, 2016;Carpinelli and Crosignani, 2017;Crosignani et al, 2018;Cahn et al, 2018;Cumming, 2018).…”

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confidence: 99%

Employment Effects of Unconventional Monetary Policy: Evidence from QE

Luck¹,

Zimmermann²

2018

FEDS

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This paper investigates the effect of the Federal Reserve's unconventional monetary policy on employment via a bank lending channel. We find that banks with higher mortgage-backed securities holdings made relatively more loans after the first and third rounds of quantitative easing (QE1 and QE3). While additional volume is concentrated in refinanced mortgages after QE1, increases are driven by newly originated home purchase mortgages and additional commercial and industrial lending after QE3. Using spatial variation, we show that regions with a high share of affected banks experienced stronger employment growth after both QE1 and QE3. While the ability of households to refinance mortgages after QE1 spurred local demand, the resulting additional employment growth was relatively weak and confined to the non-tradable goods sector. In contrast, the increase in employment after QE3 is sizable and can be attributed to the supply of additional credit to firms. To support this finding, we use new confidential loan-level data to show that firms with stronger ties to affected banks increased employment and capital investment more after QE3. Altogether, our findings suggest that unconventional monetary policy can, similar to conventional monetary policy, affect real economic outcomes.

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“…On another note, firm loans' eligibility as collateral in Eurosystem refinancing operations was not altered by the rating reform: all firms which were eligible remain eligible after the reform. In fact, as described by Cahn et al (2017), and Mésonnier et al (2017), changes in the eligibility of the (loans to) firms may influence the loan supply of credit institutions.…”

Section: B the Reform Of The Rating Scale Of April 2004mentioning

confidence: 99%

External Credit Ratings and Bank Lending

2018

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We study how third-party rating information influences firms' access to bank financing and real outcomes. We exploit a refinement in the rating scale that occurred in France in 2004. The new rules made some firms within each rating class receive a positive rating surprise. We find that such firms enjoy greater and cheaper access to bank credit. In particular, they obtain more credit from previously less informed lenders, and start new bank relationships more easily. Consequently, they rely on equity to a lower extent and invest more. These findings suggest that credit ratings help reducing the hold-up problem and increase competition among banks.

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Unconventional Monetary Policy Transmission and Bank Lending Relationships

Cited by 19 publications

References 0 publications

Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth

Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth

Employment Effects of Unconventional Monetary Policy: Evidence from QE

External Credit Ratings and Bank Lending

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