The Great Lockdown: pandemic response policies and bank lending conditions

Carlo Altavilla, Francesca Barbiero, Miguel Boucinha () and Lorenzo Burlon

No 15298, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This study analyses the policy measures taken in the euro area in response to the outbreak and the escalating diffusion of new coronavirus (COVID-19) pandemic. We focus on monetary, microprudential and macroprudential policies designed specifically to support bank lending conditions. For identification, we use proprietary data on participation in central bank liquidity operations, high-frequency reactions to monetary policy announcements, and confidential supervisory information on bank capital requirements. The results show that in the absence of the funding cost relief and capital relief associated with the pandemic response measures, banks' ability to supply credit would have been severely affected. The results also indicate that the coordinated intervention by monetary and prudential authorities amplified the effects of the individual measures in supporting liquidity conditions and helping to sustain the flow of credit to the private sector. Finally, we investigate the potential real effects of the joint pandemic response measures by estimating the adjustment in labour input variables for firms that in the past have been more exposed to similar policies. We find that, in absence of monetary and prudential policies, the pandemic would lead to a significantly larger decline in firms' employment.

Keywords: Covid-19 crisis; Monetary policy; Bank lending; Prudential policy (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-ban and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (46)

Downloads: (external link)
https://cepr.org/publications/DP15298 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Great Lockdown: Pandemic response policies and bank lending conditions (2023)
Working Paper: The great lockdown: pandemic response policies and bank lending conditions (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:15298

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP15298

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().