Job market paper

The Real Effects of Funding for Lending: Evidence from the European Central Bank’s Targeted Longer-Term Refinancing Operations

This paper investigates whether funding for lending programmes stimulate firm investment, using the European Central Bank’s Targeted Longer-Term Refinancing Operations (TLTROs). I construct a novel matched firm–bank dataset combining firm balance sheets, banking relationships, and supervisory bank data. Using two-way fixed effects regressions and a continuous-treatment difference-in-differences design exploiting the 2020 recalibration of TLTRO III, I find that banks with greater TLTRO take-up expand lending, while firms linked to these banks increase borrowing and accumulate deposits. However, I find no evidence of higher firm investment, suggesting that funding for lending programmes may stimulate credit without necessarily generating real economic effects.

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