Published as part of the ECB Economic Bulletin, issue 8/2022.
This box considers the financing gap faced by euro area companies and how these companies' expectations regarding future financing availability relate to current and future macroeconomic outcomes. The ongoing normalization of monetary policy has gradually tightened lending conditions, impacting the supply of external financing as part of the standard transmission of monetary policy. A key issue is the impact of changes in financing conditions and access to firm-specific and aggregate growth. The Survey on Enterprise Access to Finance (SAFE) provides detailed information on the financing status of euro area companies. SAFE has been conducted twice a year since 2009, and surveys approximately 10,000 companies across the euro area. This box analyzes the relationship between macroeconomic developments and his two key indicators of SAFE. Changes in the external financing gap (defined as the difference between changes in the demand for and availability of external financing) and changes in a firm's financing. Expectations regarding availability of bank loans.[1]
At present, euro area companies are reporting a widening funding gap and expect future bank loan availability to decline (Chart A). Since his creation of SAFE in 2009, there has been a generally inverse relationship between changes in the financing gap and expectations about the availability of future bank financing. Furthermore, increased activity in the euro area (positive real GDP growth) typically coincides with a narrowing of the corporate financing gap and optimism on the part of companies regarding the future availability of bank financing. . The development of these indicators has so far been influenced by the euro area business cycle and his ECB's monetary policy. During the sovereign debt crisis of 2011-2013, the financing gap for euro area companies widened significantly, indicating the difficulty for companies to meet their external financing needs. Subsequently, supported by monetary policy easing by the ECB, the funding gap gradually narrowed and expectations for the availability of bank financing improved. Financing conditions deteriorated sharply after the onset of the coronavirus (COVID-19) pandemic in 2020, but have stabilized again thanks to monetary policy and public sector support. Therefore, the deterioration was only temporary. More recently, against the backdrop of slowing economic growth, rising inflation and normalization of monetary policy, companies have begun to signal a widening funding gap, with bank loans for the period October 2022 to March 2023 is expected to decrease in availability.
Chart A
Financing gaps reported by euro area companies, expected availability of bank financing, changes in financing barriers, and trends in euro area real GDP growth
However, despite the recent rise in borrowing costs, euro area companies remained not particularly concerned about financing (Figure A). In the latest survey, the proportion of companies reporting obstacles to obtaining bank financing remained largely unchanged compared to the previous survey, mainly driven by changes in banks' willingness to lend.[2]
Tightening monetary policy increases corporate financing gaps and lowers expectations about the availability of future bank financing (Exhibit B). The practice of econometrics makes it possible to more quantitatively assess how monetary policy affects a company's financing situation.This is done using local projection[3]We estimate the response of firms' financing gaps and expectations about the availability of future bank financing (measured at the aggregate level by net balances across firms) to a specific monetary policy shock.[4]. Here, the monetary policy shock is measured by the target coefficient of Altavilla et al. (2019), which captures interest rate surprises at the short-term end of the yield curve before and after ECB monetary policy announcements.[5] Chart B shows that monetary policy shocks have a significant impact on firms' financing gaps and expectations regarding the availability of future bank financing within two years. Specifically, a 1 standard deviation shock from monetary policy is equivalent to a 4 basis point shock to the OIS interest rate in one month, increasing the average firm's funding gap by about 3 percentage points over six months. It is estimated that.[6] By comparison, the standard deviation of the change in the funding gap since 2009 is 7%. The same shock reduced the net share of firms expecting an increase in the availability of bank financing by 5 percentage points. This effect persists for up to two years after the shock and shows how monetary policy affects firms' financing conditions through credit supply. These findings confirm the results of previous studies that financing expectations play an important role in the bank lending channel of monetary policy.[7] As actual credit conditions change, the interaction between changes in bank loan availability and demand is also affected.
Chart B
Responses of firms' financing gaps and expectations of future bank loan availability to identified monetary policy shocks
As the financing gap widens, companies tend to be more concerned about accessing future financing, suggesting that changes in the financing gap are important to a company's growth prospects (Exhibit C). In order to assess whether changes in loan conditions have an impact on the real economy, it is naturally necessary to analyze the impact of the changes on business confidence. SAFE measures business confidence by asking businesses how concerned they are about access to finance.[8] Overall, companies do not believe that financing is a major concern in recent years due to the prolonged period of monetary easing.[9] However, this may change as monetary policy normalizes. Firm-level data are used to study the relationship between the financing gap and firms' concerns about access to finance. Graph C shows the correlation between the funding gap and the level of concern about access to finance. This bins the responses of companies since 2009 according to their ratings of access to finance concerns, after removing common variations within countries and time periods and calculating bin-specific average financial concern levels. This is done by grouping. The positive correlation indicates that firms with a large financing gap perceive access to financing as a more pressing concern. Therefore, the funding gap is considered to be related to the company's overall sentiment, which may impact its future growth prospects.
Chart C
The relationship between concerns about access to finance and the financing gap at the firm level
Expectations regarding the availability of funding and bank financing are related to current and future real GDP growth. A firm's access to external financing influences its business confidence, but it is important to examine how this relates to macroeconomic outcomes. The average evolution of euro area GDP growth with expectations from SAFE as a measure of the net change in the financing gap and change in financing conditions is estimated using local forecasts.[10] This estimate is not considered a causal relationship, but provides an indication of the average future development following a particular change in SAFE measures. Exhibit D shows that a 1 percentage point increase in the financing gap indicator or a decrease in expected future bank loan availability leads to a larger relative decline in real GDP in the euro area by about 0.2 percentage points on average in the following year. is shown. There will be no change to these funding metrics, but there will be a slight additional impact next year. These effects are estimated conditional on current and lagged GDP growth, thereby using the information content contained in SAFE beyond the currently observable evolution of the business cycle. The estimated impact is persistent, especially when considering changes in firms' expectations regarding the availability of financing. This suggests that the forward-looking variables, which are a unique feature of SAFE, contain useful information for understanding the future development of the euro area economy.
Chart D
The average development of euro area real GDP after a deterioration in financing conditions or the expected availability of bank financing, compared to the situation without the deterioration.