The effect of TLTRO-II on bank lending

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Title: The effect of TLTRO-II on bank lending
ISBN: 978-952-323-269-3
Author: Laine, Olli-Matti
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2019
Series number: 7/2019
Year of publication: 2019
Publication date: 8.4.2019
Published in: Revised version published on 20 March, 2020.
Pages: 32
Subject (yso): rahapolitiikka; euroalue; rahoitus; pankit; luotonanto; luotot; vaikutukset
Keywords: TLTRO-II
JEL: E44; E51; E52; G21
Other keywords: TLTRO; unconventional monetary policy; credit supply; euro area
Abstract: This study estimates the effect of the European Central Bank’s second series of targeted longerterm refinancing operations (TLTRO-II) on bank lending using bank level data from multiple countries and instrumental variable estimation. Effects on corporate loans and loans for consumption are analysed separately. The cumulative effect of TLTRO-II on participating banks’ stock of corporate loans is estimated to be about 20 per cent. The effect on lending for consumption is found close to zero. The positive effects on corporate loans are found to be driven by crisis countries indicating that the effectiveness of monetary policy depends on the economic conditions. Additionally, the effect on government bond purchases is found negative. This result is very different from the earlier results regarding non-targeted liquidity operations.

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