The transmission of targeted monetary policy to bank credit supply

In this paper I estimate the impact of Targeted Longer-Term Refinancing Operations (TLTRO) on the evolution of lending amounts and rates in Slovenia, with a specific focus on distinct effects of TLTRO-I and II. I use a combination of difference-in-differences and instrumental variable approach, which together with detail credit register data enable the identification of supply side effects of the TLTRO policy. The results show a supporting impact of targeted operations on bank loan supply, resulting in higher credit growth and lower rates. I find that the TLTRO-I was supportive through both the quantity and price channels, whereas the TLTRO-II only shows a significant impact on the credit amount. Further, I find the transmission of TLTRO-I was higher through better capitalized banks, whereas both policy waves supported lending to safe and stable firms with higher credit ratings.