Supply or Demand: What Drives Fluctuations in the Bank Loan Market?
In: ECB Working Paper No. 2022/2646
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In: ECB Working Paper No. 2022/2646
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In: ECB Working Paper No. 2125
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In: Economic policy
ISSN: 1468-0327
In: ECB Working Paper No. 2105
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Working paper
We analyse the impact of standard and non-standard monetary policy on bank profitability. We use both proprietary and commercial data on individual euro area bank balance-sheets and market prices. Our results show that a monetary policy easing – a decrease in short-term interest rates and/or a flattening of the yield curve – is not associated with lower bank profits once we control for the endogeneity of the policy measures to expected macroeconomic and financial conditions. Accommodative monetary conditions asymmetrically affect the main components of bank profitability, with a positive impact on loan loss provisions and non-interest income offsetting the negative one on net interest income. A protracted period of low monetary rates has a negative effect on profits that, however, only materializes after a long time period and is counterbalanced by improved macroeconomic conditions. Monetary policy easing surprises during the low interest rate period improve bank stock prices and CDS. ; L.P. acknowledges the financial support from the Spanish Ministry of Economy, Industry and Competitiveness [Grant ECO2015-68136-P] and FEDER, UE and from the European Research Council Grant [project 648398].
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In: European Corporate Governance Institute – Finance Working Paper No. 936/2023
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In: CEPR Discussion Paper No. DP15298
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In: ECB Working Paper No. 20202465
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In: ECB Occasional Paper No. 222 (2019); ISBN 978-92-899-3687-3
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In: ECB Working Paper No. 2202
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In: ECB Working Paper No. 2349
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In: CEPR Discussion Paper No. DP14288
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In: Swedish House of Finance Research Paper, Forthcoming No. 22-17
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In: CEPR Discussion Paper No. DP17337
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