XXVI Edition

14-15-16 December 2017"

Did Italian banks trade-off lending with government bond purchases?

Pietrovito Filomena Pietrovito, University of Molise
Pozzolo Alberto Franco, University of Molise

Using a sample of 105 Italian co-operative banks lending to 2,200 fi rms operating in Italy, we study banks' trade-off between government bond purchases and lending to firms during the post sovereign debt crisis period (2012-2014). Following the identifi cation procedure of Khwaja and Mian (2008), we estimate the impact of the shift of banks' portfolio preferences towards government bonds on credit supply. Our results show that, controlling for loan demand, banks that acquired a larger amount of government bonds reduced relatively more their supply of both lines of credit and long-term loans.

Area: Banking

Keywords: Credit supply; Government bond purchases; bank-firm relationship

Paper file

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