Credit Supply and Demand in Unconventional Times

37 Pages Posted: 21 Nov 2018

See all articles by Carlo Altavilla

Carlo Altavilla

European Central Bank (ECB)

Miguel Boucinha

European Central Bank (ECB)

Sarah Holton

European Central Bank (ECB)

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Date Written: November 20, 2018

Abstract

Do borrowers demand less credit from banks with weak balance sheet positions? To answer this question we use novel bank-specific survey data matched with confidential balance sheet information on a large set of euro area banks. We find that, following a conventional monetary policy shock, bank balance sheet strength influences not only credit supply but also credit demand. The resilience of lenders plays an important role for firms when selecting whom to borrow from. We also assess the impact on credit origination of unconventional monetary policies using survey responses on the exposure of individual banks to quantitative easing and negative interest rate policies. We find that both policies do stimulate loan supply even after fully controlling for bank-specific demand, borrower quality, and balance sheet strength.

Keywords: credit demand and supply, bank lending survey, balance sheet strength, non-standard monetary policy

JEL Classification: E51, G21

Suggested Citation

Altavilla, Carlo and Boucinha, Miguel and Holton, Sarah and Ongena, Steven R. G., Credit Supply and Demand in Unconventional Times (November 20, 2018). ECB Working Paper No. 2202, Available at SSRN: https://ssrn.com/abstract=3288495 or http://dx.doi.org/10.2139/ssrn.3288495

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Miguel Boucinha

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Sarah Holton

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Steven R. G. Ongena

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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