• Liquidation value and loan pricing (with G.Schepens and J-D. Sigaux)

Journal of Finance, 2024, Volume 79, Issue 1

This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction-level data on short-term repurchase agreements, we show that borrowers pay a 1.1 to 2.6 basis points premium when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan-level credit registry data suggest that the results extend to the corporate loan market as well.

• Targeted monetary policy, dual rates and bank risk taking (with L. Burlon, M. Dimou, J. Toczynski)

European Economic Review, 2024, 170, 104889

We assess whether dual interest rates – central bank funding at rates below the interest rates on reserves – influence the size and composition of bank credit. We measure exposure to the policy using daily reactions of bank funding costs to the announcement of the recalibration of the ECB’s TLTROs in April 2020. We then use the Euro area credit register to follow the evolution of bank lending conditions and risk-taking. We find that the measure had a strong positive effect on bank credit and, in contrast to a standard rate cut, was not accompanied by an increase in risk-taking.

• The great lockdown: pandemic response policies and bank lending conditions (with C. Altavilla, M. Boucinha, L. Burlon)          

European Economic Review, 2023, 156, 104478

This study analyses the effects of monetary and prudential policies taken in response to the outbreak of the coronavirus pandemic to support bank lending conditions. More precisely, we focus on the effects of targeted longer-term refinancing operations (TLTROs) and their interaction with supervisory measures taken in the euro area. For identification, we use proprietary data on participation in central bank liquidity operations, high-frequency reactions to monetary policy announcements, and confidential supervisory information on bank capital requirements. We show that, in the absence of the funding cost relief associated with the pandemic response measures, banks’ ability to supply credit would have been severely affected. The results are robust to controlling for other concomitant policy measures such as government guarantees or quantitative easing. Our findings also indicate that the coordinated intervention by monetary and prudential authorities amplified the effects of the individual measures in supporting liquidity conditions and helping to sustain the flow of credit to the private sector. Finally, we find that, while monetary and prudential policies did not promote “zombie” lending and “zombie” firms, in absence of these measures the pandemic would have led to a significantly larger decline in firms’ employment.

•  Debt overhang, global growth opportunities, and investment (with A. Popov and M. Wolski)

Journal of Banking & Finance, Volume 120, 2020, 105950

Using a pan-European data set of 8.5 million firms, we find that firms with high debt financing invest relatively more, than otherwise similar firms, if they are operating in sectors facing good global growth opportunities. The positive impact of a marginal increase in debt on investment in good-global-growth-opportunities sectors disappears if firm debt is already excessive, if it is dominated by short maturities, and during systemic banking crises. Our results are consistent with theories of the disciplining role of debt, as well as with models highlighting the negative link between firm- and bank-related agency problems and corporate investment.

• Targeted monetary policy, dual rates and bank risk taking (with L. Burlon, M. Dimou, J. Toczynski)

ECB working paper, 2682, 2022, VoxEU Column, SUERF policy brief

• Monetary policy and bank stability: the analytical toolbox reviewed (with U. Albertazzi, D. Marqués-Ibáñez, A. Popov, C. Rodriguez d’Acri, T. Vlassopoulos), ECB working paper, 2377, 2020, VoxEU Column

• Credit risk and bank lending conditions (with M. Dimou) Box 8 in ECB Economic Bulletin, Issue 4, 2024

• TLTRO III and bank lending conditions (with M. Boucinha and L. Burlon), ECB Economic Bulletin, Issue 6, 2021.

→ Speeches: Philip Lane (ECB. October 2022)

• Climate change and monetary policy in the euro area (Workstream on climate change), Occasional paper series, No. 271, 2021.

• The new series of quarterly targeted longer-term refinancing operations: impact on funding costs and transmission (with  L. Burlon), Box 1 in ECB Economic Bulletin, Issue 1, 2020

• Misallocation of Investment in Europe: The Role of Debt Overhang and Credit Market Distress, in Finance and Investment: The European Case, Mayer, C., Micossi, S., Onado, M., Pagano, M., Polo, A. (eds.) (2018), Oxford University Press: Oxford, UK.

• In sickness and in health: protecting and supporting public investment in Europe (with Z. Darvas), Bruegel Policy Contribution, 2, 2014.

• Meeting the manufacturing firms involved in GVCs (with M. Blanga-Gubbay and R. Veugelers), in Manufacturing Europe’s future, Veugelers, R. (2013), Bruegel Blueprint 21: 107-138