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A non-standard monetary policy shock: The ECB's 3-year LTROs and the shift in credit supply

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  • Darracq-Paries, Matthieu
  • De Santis, Roberto A.

Abstract

We study the macroeconomic effects of the 3-year long-term refinancing operations (LTROs) introduced by the ECB in December 2011 with the aim of reducing the obstacles to credit supply through the mitigation of liquidity and funding risks in the euro area banking system. Therefore, we interpret the measure as a credit supply shock, which is identified both recursively and with sign restriction methods using the euro area Bank Lending Survey (BLS). The size of the shock due to the LTROs is computed using both the April 2012 BLS and the special ad-hoc questions on the LTROs conducted in February 2012. The counterfactual exercises suggest that the 3-year LTROs lifted prospects for real GDP and loan provision to non-financial corporations and increased goods prices over the next two-to-three years, thereby avoiding a major credit crunch.

Suggested Citation

  • Darracq-Paries, Matthieu & De Santis, Roberto A., 2015. "A non-standard monetary policy shock: The ECB's 3-year LTROs and the shift in credit supply," Journal of International Money and Finance, Elsevier, vol. 54(C), pages 1-34.
    • Handle: RePEc:eee:jimfin:v:54:y:2015:i:c:p:1-34
    DOI: 10.1016/j.jimonfin.2015.02.011
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    More about this item

    Keywords

    Non-standard monetary policy measures; Panel VAR;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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