Can Central Banks Boost Corporate Investment: Evidence from the ECB Liquidity Injections

Stine Louise Daetz, Marti G. Subrahmanyam, Dragon Yongjun Tang, Sarah Qian Wang

Research output: Working paperResearch


Can monetary stimulus boost corporate investment? We answer this question by studying ECB's 2011-2012 Longer-Term Refinancing Operations (LTROs), which provided cheap funding to Eurozone banks. We find that, relative to their non-Eurozone counterparts, Eurozone firms invested more after the LTROs. However, riskier banks took more funds from the LTROs, and their uptake is negatively associated with their clients' investment. In other words, firms reduced
investment when their banks took cheap LTRO funds from the ECB. Overall, our results highlight the difficulty of boosting investment by injecting liquidity into the banking system, especially with impaired bank balance sheets.
Original languageEnglish
Place of PublicationKøbenhavn
PublisherDanmarks Nationalbank
Number of pages57
Publication statusPublished - 18 May 2018
Externally publishedYes
SeriesDanmarks Nationalbank. Working Papers


  • Unconventional monetary policy
  • ECB interventions
  • Corporate policies
  • Real economy

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