Abstract

AbstractDo borrowers demand less credit from banks with weak balance sheets, following monetary policy shocks? To answer this, we use novel bank‐specific survey data matched with balance sheet information for euro area banks. We find that, following a monetary policy shock, bank strength influences credit demand as well as credit supply. Bank resilience is important for firms when selecting a lender and it is therefore vital to control for bank‐specific demand when identifying credit supply shocks. An application using bank‐specific demand shows that—even after fully controlling for demand, borrower quality, and bank strength—unconventional monetary policies stimulate loan supply.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.