Central banks

Bank to non-bank lending and the reallocation of credit

04/16/2026 European Central Bank Central banks

We analyze how bank lending to non-bank financial institutions (NBFIs) affects credit supply to the real economy. Using granular supervisory and loan-level data, we document rapid growth in bank lending to NBFIs relative to lending to non-financial firms. This growth is driven primarily by reverse repos to NBFIs that invest in securities, e.g., investment funds, rather than by loans to NBFIs that extend credit to firms, e.g., private credit funds.

Quantile selection in the gender pay gap

04/14/2026 European Central Bank Central banks

We propose a new approach to estimate selection-corrected quantiles of the gender wage gap. Our method employs instrumental variables that explain variation in the latent variable but, conditional on the latent process, do not directly affect selection. We provide semiparametric identification of the quantile parameters without imposing parametric restrictions on the selection probability, derive the asymptotic distribution of the proposed estimator based on constrained selection probability weighting, and demonstrate how the approach applies to the Roy model of labor supply.

Monetary policy without an anchor

04/13/2026 European Central Bank Central banks

Policymakers often cite the risk that inflation expectations might “de-anchor” as a key reason for responding forcefully to inflationary shocks. We develop a model to analyze this trade-off and to quantify the benefits of stable long-run inflation expectations. In our framework, households and firms are imperfectly informed about the central bank’s objective and learn from its policy choices. Recognizing this interaction, the central bank raises interest rates more aggressively after adverse supply shocks and accepts short-run output costs to secure more stable inflation expectations.

Monetary policy under multiple financing constraints

04/09/2026 European Central Bank Central banks

We revisit the credit channel of monetary policy when firms face multiple financing constraints, a common feature of corporate financing we document empirically. Our theory shows that the multiplicity of constraints dampens the transmission of expansionary policy to firm borrowing and investment notably but amplifies the transmission of policy tightening. This asymmetry arises because, when policy tightens (eases), the most (least) responsive constraint binds. Using U.S.

Dynamic credit constraints: theory and evidence from credit lines

04/08/2026 European Central Bank Central banks

We use a comprehensive Swedish credit register to document that firms across the size distribution have access to substantial borrowing capacity via credit lines. However, most firms choose not to use all available credit, even though interest rates are low compared to their return on equity. The low utilization of credit is consistent with a theoretical model in which utilization rates decrease with both real and financial uncertainty.

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