Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/191908
Year of Publication: 
2019
Series/Report no.: 
DIW Discussion Papers No. 1781
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We examine the credit channel of monetary policy from 2000 to 2015 in the Euro Area using daily monetary policy shock and credit risk measures in an autoregressive distributed lag model. We find that an expansionary monetary policy shock leads to a short-run increase in the credit risk of non-financial corporations. This dysfunctionality of the credit channel is driven by the crisis-dominated post-2009 period. During this period, market participants may have interpreted expansionary monetary policy shocks as a signal of worsening economic prospects. We further distinguish policy shocks aiming at short- and long-run expectations of market participants, i.e. target and path shocks. The adverse effect disappears for crisis countries when the European Central Bank targets long-run rather than short-run expectations.
Subjects: 
Credit Channel
Credit Spreads
Euro Area Financial Markets
Forward Guidance
Monetary Policy
Zero Lower Bound
JEL: 
C22
E44
E52
G12
Document Type: 
Working Paper

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