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Monetary policy, central bank information, and bank lending: Evidence from German banks

Author

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  • List, Sophia
  • Metiu, Norbert

Abstract

This paper examines the impact of monetary policy and central bank information on banks' lending using data on German bank balance sheets from 2002 to 2018. Local projection estimates show that the volume of loans to non-financial corporations declines significantly after a restrictive monetary policy shock that is independent of non-monetary information in central bank announcements. This decline is stronger for relatively small banks with less liquid balance sheets, which have less access to external financing. By contrast, the volume of loans increases significantly following an unexpected monetary policy rate tightening that is associated with favorable information on the economic outlook. This increase is stronger for relatively small banks with more liquid balance sheets, which are better able to boost lending. This insight adds a new dimension to the role of banks in the transmission of central bank policy.

Suggested Citation

  • List, Sophia & Metiu, Norbert, 2025. "Monetary policy, central bank information, and bank lending: Evidence from German banks," Discussion Papers 06/2025, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:314412
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    More about this item

    Keywords

    Bank lending; Central bank; Credit; Information shock; Monetary policy; Transmission mechanism;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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