What happens when the ECB opens the cash tap? : an application to the Portuguese credit market
Autor(a) principal: | |
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Data de Publicação: | 2019 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/26904 |
Resumo: | During the 2008 subprime crisis, central banks took unprecedented measures to restore financial markets. In an effort to boost the Eurozone economy, the ECB introduced the Targeted Longer-Term Refinancing Operations (TLTRO) to stimulate bank lending to the real economy. In this dissertation, using proprietary data from the Bank of Portugal, we show that the TLTRO intervention is positively related with an increase in credit granted to Portuguese firms. Nevertheless, these funds were transmitted to the economy mainly during the last three days of the month and through credit lines, which are riskier, given the lower credit worthiness of borrowers. We empirically confirm this fact, given the higher default rate ex post. We also find that companies held less cash after the TLTRO injection. However, the impact of these injections depends, to a great extent, on a company’s marginal value of cash, where we find that highly levered firms increased their cash holdings, as opposed to less levered firms. Finally, we show that, after the ECB´s liquidity injection, Portuguese companies decreased their investments and instead used the extra funds as a liquidity buffer. Overall, we provide evidence on two previously undocumented effects of the ECB’s Targeted Longer-Term Refinancing Operation: banks provided riskier loans and borrowers did not use the funds for investment purposes. |
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What happens when the ECB opens the cash tap? : an application to the Portuguese credit marketTLTROLiquidity injectionRisk-takingCash holdingsCorporate investmentInjeção de liquidezTomada de riscoTesourariaInvestimento corporativoDomínio/Área Científica::Ciências Sociais::Economia e GestãoDuring the 2008 subprime crisis, central banks took unprecedented measures to restore financial markets. In an effort to boost the Eurozone economy, the ECB introduced the Targeted Longer-Term Refinancing Operations (TLTRO) to stimulate bank lending to the real economy. In this dissertation, using proprietary data from the Bank of Portugal, we show that the TLTRO intervention is positively related with an increase in credit granted to Portuguese firms. Nevertheless, these funds were transmitted to the economy mainly during the last three days of the month and through credit lines, which are riskier, given the lower credit worthiness of borrowers. We empirically confirm this fact, given the higher default rate ex post. We also find that companies held less cash after the TLTRO injection. However, the impact of these injections depends, to a great extent, on a company’s marginal value of cash, where we find that highly levered firms increased their cash holdings, as opposed to less levered firms. Finally, we show that, after the ECB´s liquidity injection, Portuguese companies decreased their investments and instead used the extra funds as a liquidity buffer. Overall, we provide evidence on two previously undocumented effects of the ECB’s Targeted Longer-Term Refinancing Operation: banks provided riskier loans and borrowers did not use the funds for investment purposes.Durante a crise de 2008, os bancos centrais tomaram medidas inéditas de modo a estabilizar os mercados financeiros. Num esforço para melhorar a economia da Zona Euro, o BCE introduziu as Targeted Longer-Term Refinancing Operations (TLTRO), com o fim de estimular a concessão de crédito à economia. Nesta dissertação, usando dados confidenciais do Banco de Portugal, mostramos que a intervenção das TLTRO está positivamente correlacionada com a concessão de crédito a empresas portuguesas. Contudo, estes fundos foram transmitidos para a economia essencialmente durante os últimos três dias do mês e através de linhas de crédito, sendo mais arriscados, dado a menor qualidade de crédito dos devedores. Empiricamente, confirmamos este facto, tendo em conta a taxa de incumprimento superior ex post. Descobrimos ainda que as empresas mantiveram menos dinheiro em caixa, após as injeções das TLTRO. No entanto, o impacto destas injeções depende, em grande medida, do valor marginal do dinheiro para as empresas, onde concluímos que empresas muito alavancadas aumentaram as suas reservas de dinheiro, ao contrário de empresas menos endividadas. Finalmente, mostramos que, após as injeções de liquidez do BCE, as empresas portuguesas diminuíram o seu investimento, tendo antes usado os fundos como almofada de liquidez. No geral, encontramos provas que, na economia portuguesa, as operações de liquidez do BCE não estimularam a economia real por duas razões: os bancos providenciaram empréstimos mais arriscados e os devedores não usaram os fundos para efeitos de investimento.Bonfim, DianaVeritati - Repositório Institucional da Universidade Católica PortuguesaFerreira, Miguel Cravo2019-02-19T12:11:13Z2019-01-2920192019-01-29T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/26904TID:202171159enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:32:24Zoai:repositorio.ucp.pt:10400.14/26904Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:21:30.330120Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
title |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
spellingShingle |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market Ferreira, Miguel Cravo TLTRO Liquidity injection Risk-taking Cash holdings Corporate investment Injeção de liquidez Tomada de risco Tesouraria Investimento corporativo Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
title_full |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
title_fullStr |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
title_full_unstemmed |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
title_sort |
What happens when the ECB opens the cash tap? : an application to the Portuguese credit market |
author |
Ferreira, Miguel Cravo |
author_facet |
Ferreira, Miguel Cravo |
author_role |
author |
dc.contributor.none.fl_str_mv |
Bonfim, Diana Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Ferreira, Miguel Cravo |
dc.subject.por.fl_str_mv |
TLTRO Liquidity injection Risk-taking Cash holdings Corporate investment Injeção de liquidez Tomada de risco Tesouraria Investimento corporativo Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
TLTRO Liquidity injection Risk-taking Cash holdings Corporate investment Injeção de liquidez Tomada de risco Tesouraria Investimento corporativo Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
During the 2008 subprime crisis, central banks took unprecedented measures to restore financial markets. In an effort to boost the Eurozone economy, the ECB introduced the Targeted Longer-Term Refinancing Operations (TLTRO) to stimulate bank lending to the real economy. In this dissertation, using proprietary data from the Bank of Portugal, we show that the TLTRO intervention is positively related with an increase in credit granted to Portuguese firms. Nevertheless, these funds were transmitted to the economy mainly during the last three days of the month and through credit lines, which are riskier, given the lower credit worthiness of borrowers. We empirically confirm this fact, given the higher default rate ex post. We also find that companies held less cash after the TLTRO injection. However, the impact of these injections depends, to a great extent, on a company’s marginal value of cash, where we find that highly levered firms increased their cash holdings, as opposed to less levered firms. Finally, we show that, after the ECB´s liquidity injection, Portuguese companies decreased their investments and instead used the extra funds as a liquidity buffer. Overall, we provide evidence on two previously undocumented effects of the ECB’s Targeted Longer-Term Refinancing Operation: banks provided riskier loans and borrowers did not use the funds for investment purposes. |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-02-19T12:11:13Z 2019-01-29 2019 2019-01-29T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/26904 TID:202171159 |
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http://hdl.handle.net/10400.14/26904 |
identifier_str_mv |
TID:202171159 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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