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Monetary Policy at Work: Security and Credit Application Registers Evidence
- Source :
- Journal of Financial Economics
- Publication Year :
- 2017
-
Abstract
- Monetary policy transmission may be impaired if banks rebalance their portfolios toward securities. We identify the bank lending and risk-taking channels of monetary policy by exploiting—Italy's unique—credit and security registers. In crisis times, with higher central bank liquidity, less capitalized banks react by increasing securities over credit supply, inducing worse firm-level real effects. However, they buy securities with lower yields and haircuts. Unlike in crisis times, in precrisis times, securities do not crowd out credit supply. The substitution from lending to securities in crisis times helps less capitalized banks repair their balance sheets and restart credit supply with a one-year lag. This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 re-search and innovation program (grant agreement no. 648398). Peydró also acknowledges financial support from the Spanish Ministry of Economy and Competitiveness through grants ECO2012-32434 and ECO2015-68182-P (MINECO/FEDER, UE) and through the Severo Ochoa Program for Centres of Excellence in R&D (SEV-2015-0563).
- Subjects :
- Economics and Econometrics
INVESTMENT
Economics
TRANSMISSION
Strategy and Management
monetary policy
Social Sciences
Monetary economics
Reach for yield
securities
regulatory arbitrage
RISK-TAKING
SHOCKS
Monetary policy transmission
CHANNEL
BANK LIQUIDITY
Business & Economics
Accounting
0502 economics and business
MANAGEMENT
Balance sheet
1402 Applied Economics
040101 forestry
050208 finance
05 social sciences
Monetary policy
1502 Banking, Finance and Investment
1. No poverty
04 agricultural and veterinary sciences
Business, Finance
Bank capital
Crowding out
Market liquidity
Credit supply
Securities
1606 Political Science
Work (electrical)
Available for sale
Central bank
FUNDS
8. Economic growth
0401 agriculture, forestry, and fisheries
LOW INTEREST-RATES
Business
Finance
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Journal :
- Journal of Financial Economics
- Accession number :
- edsair.doi.dedup.....287249f83b22ff1c2db8cb5f7c4961bd