The transmission channels of unconventional monetary policy: Evidence from a change in collateral requirements in France
Anne-Laure Delatte
Pranav Garg
Jean Imbs
Anne-Laure Delatte
Pranav Garg
Jean Imbs
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- We examine the effects of a change in collateral requirements in the French credit market in 2012.
- We use a bank-firm level credit registry combined with firm-level balance sheet data.
- Credit increased after the liquidity injection, exclusively driven by supply.
- There was strategic risk-taking by a group of banks, an unintentional implication of the policy.
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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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