The Real Spillover Effects of Unconventional Monetary Policy
Anya Kleymenova, Assistant Professor of Accounting
In this paper, we investigate the real effects of the European Central Bank’s (ECB) unconventional monetary policy interventions. In particular, we focus on the impact of the introduction of the novel ECB Corporate Sector Purchase Programme (CSPP) —whereby ECB purchases corporate bonds from EU-active firms to increase inflation— on bank lending and corporate investment activities. In the first step, we provide descriptive evidence about the types of bonds ECB-designated central banks purchase in the primary and secondary market. We then investigate whether central banks’ purchases of corporate debt in the primary market affect firms’ capital structure directly (for affected firms) and indirectly (through spillover effects on similar matched firms whose bonds were not selected for purchase by the designated central banks). Furthermore, we plan to study whether this unexpected increase in credit supply and decrease in cost of borrowing changes firms’ real decisions (e.g., investments). Finally, we plan to investigate whether the increased credit supply for larger firms has spillover effects on bank lending to small and medium enterprises (SME sector) and their subsequent real activities.