IMF Working Papers

What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19

By Divya Kirti, Maria Soledad Martinez Peria, Prachi Mishra, Jan Strasky

February 3, 2023

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Divya Kirti, Maria Soledad Martinez Peria, Prachi Mishra, and Jan Strasky. What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19, (USA: International Monetary Fund, 2023) accessed November 5, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper analyzes the impact of fiscal, monetary, and prudential policies during the COVID-19 pandemic on bank lending across a broad sample of countries. We combine a comprehensive announcementlevel dataset of policy actions with bank and firm-level information to analyze the effectiveness of different types of policies. We document that different types of policies were introduced together and hence accounting for policy combinations, or packages, is crucial. Lending grew faster at banks in countries that announced packages combining fiscal, monetary, and prudential measures relative to those that relied on some, but not all, policy dimensions. Within packages including all three types of policy measures, banks in countries with more and larger measures saw faster loan growth. The impact was larger among more constrained banks with low equity levels. Large packages combining fiscal, monetary and prudential policies also increased liquidity for bank dependent firms, but did not disproportionately benefit unviable firms.

Subject: Bank credit, COVID-19, Credit, Financial institutions, Fiscal policy, Health, Loans, Money

Keywords: Bank credit, Bank lending, COVID-19, Credit, Global, IMF working paper research Department, Loans, Policy combination, Policy effectiveness, Policy package, Policy packages, Prudential policy

Publication Details

  • Pages:

    41

  • Volume:

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  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2023/025

  • Stock No:

    WPIEA2023025

  • ISBN:

    9798400233913

  • ISSN:

    1018-5941