Variable rate corporate loans strengthen transmission of monetary policy

Abstract

There are considerable differences between countries of the euro area in the prevalence of variable rate bank loans. According to recent research by the authors, the extent to which bank loans are variable rate loans influences how the key ECB interest rates affect the demand for corporate loans. Following the rise in interest rates in 2022, companies favouring variable rate loans reduced their borrowing relative to other companies. The effect was particularly strong in small companies.