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Unconventional Monetary Policy Transmission and Bank Lending Relationships

Author

Listed:
  • Christophe Cahn

    (Banque de France, 75035 Paris Cedex 01, France)

  • Anne Duquerroy

    (Banque de France, 75035 Paris Cedex 01, France)

  • William Mullins

    (Rady School of Management, University of California San Diego, La Jolla, California 92093)

Abstract

Firms with only one bank relationship make up the majority of firms in many economies. This paper explores whether policy-driven lending is differentially transmitted to single-bank firms in comparison with the multibank firms that are the focus of the literature. Using unique variation in the ECB’s very long-term refinancing operations (VLTROs), which affected lending to firms discontinuously across credit ratings but within banks, we find selective transmission of VLTRO liquidity to single-bank firms. Banks apply higher lending standards to single-bank firms, with banking relationships determining both new lending and lending maturity. By contrast, banks appear to transmit policy lending near-uniformly across multibank firms.

Suggested Citation

  • Christophe Cahn & Anne Duquerroy & William Mullins, 2025. "Unconventional Monetary Policy Transmission and Bank Lending Relationships," Management Science, INFORMS, vol. 71(2), pages 1187-1212, February.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:2:p:1187-1212
    DOI: 10.1287/mnsc.2022.01871
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