Carlo Altavilla (European Central Bank) — Fabio Canova (BI Norwegian Business School, CAMP, and CEPR) — Matteo Ciccarelli (European Central Bank)
We analyze the pass-through of monetary policy measures to households and firms' lending rates in the Euro area using novel bank-level datasets. Banks' characteristics such as the capital ratio, the exposure to domestic sovereign debt, the percentage of non-performing loans and the stability of the funding structure are responsible for the heterogeneity in pass-through of conventional monetary policy changes. The location of a bank is irrelevant. Non-standard measures reduced lending rate heterogeneities. Banks located in financially stressed countries and with weak balance sheets were most affected. Banks' lending margins fell considerably.