Fabio Canova (European University Institute/BI Norwegian Business School): Mending the broken link: Heterogeneous bank lending and monetary policy pass-through

Fabio Canova (European University Institute/BI Norwegian Business School): Mending the broken link: Heterogeneous bank lending and monetary policy pass-through

Abstract
We analyze the pass-through of monetary policy measures to firms and household lending rates in the euro area using a novel bank-level dataset. Banks' characteristics such as the capital ratio, the exposure to sovereign debt, and the percentage of non-performing loans are responsible for the heterogeneity of pass-through of conventional monetary policy changes. The location of a bank is instead irrelevant. Non-standard measures normalized the capacity of banks to grant loans. Banks with high level of non-performing loans and low capital ratio were most affected. Banks' lending margins were also affected. Macroeconomic implications are discussed.

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