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What Policy Combinations Worked? The Effect of Policy Packages on Bank Lending during COVID-19
Author:
Mr. Divya Kirti
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https://orcid.org/0000-0001-6636-6687
,
Mr. Maria Soledad Martinez Peria 0000000404811396 https://isni.org/isni/0000000404811396 International Monetary Fund

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Ms. Prachi Mishra
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Jan Strasky
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 025
Language:
English
Publication Date:
03 Feb 2023
DOI:
https://doi.org/10.5089/9798400233913.001
ISBN:
9798400233913
ISSN:
1018-5941
Pages:
41
Keywords:
COVID-19; policy packages; policy effectiveness; bank lending; IMF working paper research Department; policy combination; policy package; prudential policy; Bank credit; Credit; Loans; Global
Legal-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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2023: Issue 025