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Unconventional monetary policy and the credit channel in the euro area

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  • Evgenidis, Anastasios
  • Salachas, Evangelos

Abstract

We disentangle credit supply and demand and we then embed this information into a Bayesian threshold VAR model to investigate the importance of the demand channel and the broad credit channel in the transmission of unconventional monetary policy on the macroeconomy during financial stress periods. We find that during such periods, UMP shocks boost aggregate demand for loans, increase agents’ net worth and revitalize credit to firms and households. In addition, counterfactual analysis suggests that non-standard policy measures aiming at stimulating loan demand and relaxing banks’ balance sheet constraints would provide a significant support to economic activity, prices and the financial sector.

Suggested Citation

  • Evgenidis, Anastasios & Salachas, Evangelos, 2019. "Unconventional monetary policy and the credit channel in the euro area," Economics Letters, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:ecolet:v:185:y:2019:i:c:s0165176519303465
    DOI: 10.1016/j.econlet.2019.108695
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    Cited by:

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    2. Anastasios Evgenidis & Apostolos Fasianos, 2021. "Unconventional Monetary Policy and Wealth Inequalities in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 115-175, February.
    3. Nikolaos Petrakis & Christos Lemonakis & Christos Floros & Constantin Zopounidis, 2024. "The impact of the ECB’s non-regular operations on bank credit: cross-country evidence," Operational Research, Springer, vol. 24(3), pages 1-37, September.
    4. Anastasios Evgenidis & Anastasios G. Malliaris, 2020. "To Lean Or Not To Lean Against An Asset Price Bubble? Empirical Evidence," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1958-1976, October.
    5. Li, Xiao-Lin & Xie, Pinyi & Ding, Hui & Si, Deng-Kui, 2023. "Central bank lending facility and investment efficiency of non-SOEs: evidence from China," Economic Modelling, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Unconventional monetary policy; Credit channel; Threshold-VAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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