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Caterina Forti Grazzini

2 August 2023
We provide new evidence on how ECB’s monetary policy decisions affect firms’ bank loan expectations in the euro area. We use firm-level data derived from the ECB Survey on the Access to Finance of Enterprises for the period 2009 to 2022 and identify the impact of monetary policy by comparing the responses of firms interviewed shortly before and after monetary policy shocks. Our results are as follows. First, we find that firms’ bank loan expectations react to monetary policy, with a contractionary shock leading to a downward revision of expectations. Second, we show that firms’ response depends on the size and the sign of the shock, with only large and contractionary shocks having a significant negative effect on expectations. Third, we observe that the different components of central bank communication (i.e. the pure monetary policy shock and the central bank information shock) have different impacts on firms’ beliefs. Fourth, we find that conventional and unconventional QE shocks have opposite effects on expectations, with the impact of QE policies mainly being driven by the central bank information component of the related announcements. Finally, we document that the response to monetary policy differs along firms’ structural characteristics.
JEL Code
C83 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Survey Methods, Sampling Methods
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies