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Paper #1565

Monetary policy at work: Security and credit application registers evidence
JosÚ-Luis Peydrˇ, Andrea Polo i Sette Enrico
Abril 2017 (Revisió: Abril 2020)
Monetary policy transmission may be impaired if banks rebalance their portfolios towards securities to e.g. risk-shift or hoard liquidity. We identify the bank lending and risk-taking channels by exploiting - Italian's unique - credit and security registers. In crisis times, with higher ECB 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, thus reaching-for-safety and liquidity. Differently, in pre-crisis time, securities do not crowd-out credit supply. The substitution from lending to securities in crisis times helps less capitalized banks to repair their balance-sheets and then restart credit supply with a one year-lag
Paraules clau:
monetary policy, securities, loan applications, bank capital, reach-for-yield, held to maturity, available for sale, trading book, haircuts, regulatory arbitrage, sovereign debt.
Codis JEL:
E51, E52, E58, G01, G21
Àrea de Recerca:
Finances i Comptabilitat / Macroeconomia i Economia Internacional / Economia Laboral, Pública, de Desenvolupament i de la Salut
R&R at the Journal of Financial Economics.

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