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The transmission of unconventional monetary policy to bank credit supply: Evidence from the TLTRO

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  • António Afonso
  • Joana Sousa‐Leite

Abstract

We assess the transmission of the Targeted Longer‐Term Refinancing Operations (TLTRO) to the bank credit supply for the Euro area (2014–2017) and for Portugal (2011:02–2018:01), using a panel data setup. In order to estimate a causal effect, we construct an instrumental variable (IV) using the maximum borrowing allowance in the TLTRO. For the Euro area, we find a positive impact of the TLTRO on the amount of credit granted to the real economy, in particular in the less vulnerable countries. For Portugal, using a difference‐in‐differences model, we find that bidding banks set lower interest rates in relation to non‐bidding banks and the difference seems to be larger in 2016 and 2017.

Suggested Citation

  • António Afonso & Joana Sousa‐Leite, 2020. "The transmission of unconventional monetary policy to bank credit supply: Evidence from the TLTRO," Manchester School, University of Manchester, vol. 88(S1), pages 151-171, September.
    • Handle: RePEc:bla:manchs:v:88:y:2020:i:s1:p:151-171
    DOI: 10.1111/manc.12335
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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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