The impact of the ECB’s non-regular operations on bank credit: cross-country evidence

The severity of the financial crisis marked a turning point in monetary policy, as traditional measures approached the effective lower bound, the ECB was forced to resort only to non-regular measures to support bank lending and revive economic activity. This study provides evidence of the effectiveness of the ECB's non-traditional measures in boosting bank credit in the euro area. We use a panel regression analysis with different model specifications to analyze aggregate credit data from fifteen euro area economies from July 2007 to June 2021. Our empirical results indicate that the ECB’s non-regular measures support bank credit but also demonstrate a structural change in the impact of non-traditional interventions on credit. Moreover, the cross-country analysis indicates the presence of heterogeneity in the transmission of non-regular policy on credit, revealing weaker effects for distressed eurozone economies as they were more affected by the financial and debt crisis. Our findings have significant implications for policymakers and financial institutions, as they demonstrate the need to adapt to a changing landscape of monetary policy.