https://doi.org/10.52903/wp2026362
THE TRANSMISSION OF MONETARY POLICY THROUGH CREDIT STANDARDS: EVIDENCE ON LOAN APPLICATION DISCOURAGEMENT IN THE EURO AREA
Georgios Mermelas
University of Patras
Athanasios Tagkalakis
Bank of Greece and University of Patras
ABSTRACT
This study examines the impact of monetary policy and its announcements on firms’ loan application discouragement, operating through changes in credit standards. We merge firm-level data from the Survey on the Access to Finance of Enterprises (SAFE) with bank-level data from the Bank Lending Survey (BLS) for twenty-euro area countries, covering the period from the first half of 2009 to the second half of 2024. The findings indicate that, following a monetary policy–induced tightening of credit standards, firms with higher turnover, stronger credit records and more stable balance sheets exhibit a lower propensity to become discouraged from applying for loans. Conversely, firms with weaker characteristics are more adversely affected. Importantly, these effects persist even when the analysis is restricted to firms with a very low probability of loan rejection, indicating that monetary policy induces a self-restriction mechanism that operates in addition to the traditional credit supply channel.
JEL-classifications: D22, E44, E52, E58, G21, L25
Keywords: Monetary Policy, Euro Area, Firm Heterogeneity, Monetary Policy Transmission, Firms’ Discouragement, Credit Standards
Disclaimer: The article expresses the views of the authors and not those of the Bank of Greece. We remain solely responsible for any errors and omissions.
Correspondence:
Athanasios Tagkalakis
Economic Analysis and Research Department
Bank of Greece
El. Venizelos 21, 10250 Athens, Greece
Tel.: +30-2103202442
email: atagkalakis@bankofgreece.gr