Does unconventional monetary policy have a distributional effect on household credit? To answer this question, I use granular data from the European Central Bank’s Household Finance and Consumption Sur- vey, which covers 17 countries in the euro area, and compare household credit in the pre–Asset Purchase Programme (APP) period with household credit in the post-APP period. I find that in addition to a posi- tive aggregate effect on household credit, the APP policy leads to the most credit expansion by the middle wealth quintile and the least by the bottom quintile. An investigation of household asset portfolios finds that property ownership and rising housing prices are the key drivers of heterogeneous household financing decisions after the APP. Recentered influence function regression and decomposition results suggest two potential policy transmission channels for household credit inequality: (1) the credit risk channel, which increases inequality through the asset valuation effect, and (2) the credit constraint channel, which reduces inequality by facilitating access to credit for low- and middle-wealth households.
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This paper explores how influential industrial policy is in the credit market in China. I use a novel hand-collected dataset with bank-sector level annual loan data from 137 commercial banks in China from 2004 to 2017, along with a quantified industrial policy dataset based on text analyses. Overall, commercial banks do not necessarily allocate more credit to sectors promoted by the central government. Banks have heterogeneous sensitivities to industrial policy. Compared with other commercial banks, rural commercial banks tend to respond most positively to industrial policy. Banks with lower asset quality, a smaller size, a higher liquidity ratio, and unlisted banks are more responsive to industrial policy. Sectors that are mainly controlled by state-owned enterprises (SOEs) always benefit relatively more credit when an industrial policy is announced, no matter the sector targeted by the policy. This is because SOEs are less risky, both economically and politically. Thus, industrial policy is not that powerful in credit reallocation due to the banks’ tradeoff between political pressure and profitability. Moreover, industrial policy leads to further distortions in financial resource allocation towards SOEs.
The Distribution of Saving across Countries, with Cian Allen and Christina Kolerus, IMF Working Paper (forthcoming)
Seigniorage Before and After QE, with Ugo Panizza and Andrea Presbitero (In progress)