research

Published work (refereed journal)

Bottero, M., Minoiu, C., Peydró, J.L., Presbitero, A.F., Polo, A. and E. Sette, 2022. Expansionary yet different: Credit supply and real effects of negative interest rate policy, Journal of Financial Economics, Vol. 146(2), pages 754-778

Abstract:  We show that negative interest rate policy (NIRP) has expansionary effects on credit supply through a portfolio rebalancing channel. By shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero-lower-bound and has effects similar to QE. For identification, we exploit ECB’s NIRP and the Italian credit register and, for external validity, European and U.S. datasets. NIRP affects more banks with higher ex-ante liquid assets, including net interbank positions. More exposed banks reduce liquid assets, expand credit supply, especially to financially-constrained firms, and cut loan rates, inducing firms to increase investment and the wage bill.

Alessandri, P. and M. Bottero, 2020. Bank lending in uncertain times. European Economic Review, 2020, vol. 128, issue C .

Abstract: We study the impact of economic uncertainty on credit supply using monthly data on more than two million corporate loan applications received by Italian banks between 2004 and 2012. We find that an increase in aggregate uncertainty has two effects: it lowers the likelihood that firms’ applications will be successful, and it prolongs the time firms have to wait for their loans to be disbursed. This financial acceleration mechanism varies in the cross section, affecting mainly banks with low capital buffers and firms that are geographically distant from the bank to which they apply.

Bottero, M., Lenzu, S.  and F. Mezzanotti, 2019. Sovereign debt exposure and the bank lending channel: impact on credit supply and the real economy.  Journal of International Economics,Volume 126, September 2020, 103328 .

Abstract: In the context of the European crisis, we show that the security portfolio of banks plays an important role in the propagation of financial shocks across countries. Using Italian loan-level data, we show that the shock to the banks' sovereign portfolio caused by the 2010 Greek bailout was passed on to Italian firms through a credit contraction. This was particularly the case for banks with a lower capital and less stable funding. The contraction in credit was similar for both large and small firms, but it only negatively affected the investment and employment decisions of small firms.

Albertazzi, U., Bottero, M. and G. Sene, 2017. Information externalities in the credit market and the spell of credit rationing. Journal of Financial Intermediation, 30: 61-70.

Abstract: We present the first empirical study of loan searching strategies and loan granting decisions in a context where banks observe whether applicants have unsuccessfully applied for credit to other lenders in the past. Our identification strategy benefits from the use of granular data on loan applications and exploits the fact that evaluating lenders observe only the rejections received by a borrower up to six months before the current application. We document that past rejections diminish the probability of approval and increase the probability that a loan search is interrupted. 

Albertazzi, U. and M. Bottero, 2014. Foreign Bank Lending: Evidence from the Global Financial Crisis. Journal of International Economics, 92, S22 - S35.

Abstract: We exploit highly disaggregated bank-firm data to investigate the dynamics of foreign vs domestic credit supplyin Italy around the period of the Lehman collapse, which brought a sudden and unexpected deterioration of economic conditions and a sharp increase in credit risk. Taking advantage of the presence of multiple lending relationships to control for credit demand and risk at the individual-firm level, we show that foreign lenders restricted credit supply (to the same firm) more sharply than their domestic counterparts. A number of exercisestesting alternative explanations for this result suggest that such more intense restriction also reflects the (functional) distance between a foreign bank's headquarter and the Italian credit market.

Working papers

Albertazzi, U., Bottero, M., Gambacorta, L. and S. Ongena. Asymmetric information and the securitization of SME loans. Bank of Italy WP 1091, December 2016 

Abstract: Using credit register data for loans to Italian firms we test for the presence of asymmetric information in the securitization market by looking at the correlation between the securitization (risk-transfer) and the default (accident) probability. We can disentangle the adverse selection from the moral hazard component for the many firms with multiple bank relationships. We find that adverse selection is widespread but that moral hazard is confined to weak relationships, indicating that a strong relationship is a credible enough commitment to monitor after securitization. Importantly, the selection of which loans to securitize based on observables is such that it largely offsets the (negative) effects of asymmetric information, rendering the overall unconditionalquality of securitized loans significantly better than that of non-securitized ones. Thus, despite the presence of asymmetric information, our results are not in line with the view that credit-risk transfer leads to lax credit standards.  

Bottero, M. and S. Schiaffi. Firm liquidity and monetary policy. Bank of Italy WP 1378, July 2022.

Abstract: We study how firms’ cash balances affect the provision of bank financing and the transmission of monetary policy via the bank-lending channel in Italy using bank- and firm-level data. From a theoretical perspective, there is no agreement on whether, for given credit demand, cash-rich companies enjoy better access to credit, as abundance of cash may reveal both positive and negative information about the firm. According to our analysis, carried on a sample of 430,000 Italian non-financial corporations over the period 2006-2018, banks view favourably firm liquidity, that is associated, on average, with cheaper bank funding and with a credit composition tilted towards term loans, at all maturities and non-collateralized. We also show that firms reallocate their liquidity in and out their deposits following changes in the slope of the yield curve, which proxies the opportunity cost of cash. Because of this, monetary policy, besides via the traditional bank lending channel, affects the cost of credit also indirectly, as banks respond to firms’ reallocation of liquidity ensuing the change in the slope of the term structure.

Work in progress

Bottero, M., Lenzu, S., Mezzanotti, F, and G. Parise. Selling bad loans. Draft available upon request.

Bottero, M. and M. Cascarano. Green Granula Borrowers. In progress.