Abstract
We analyze the impact of market liquidity on bank lending in the euro area over the period 2003–16 and find that market liquidity is positively related to aggregate loan volumes and negatively related to average credit spreads. This relation is stronger during crisis times and asymmetric so as the impact of a reduction in liquidity is more significant. Results are confirmed on the individual bank level and strongest for non-listed and less profitable banks. This implies that properly functioning and sufficiently liquid financial markets are necessary to avoid negative consequences of restrictions in bank lending for the real economy.
Full Text
Submitted Version (
Free)
Published Version
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