Unconventional monetary policies and the credit market

We propose a theoretical model based on the bank lending channel to assess the ability of lending facilities and swap programs to affect the credit interest rate. The model predicts the success of both unconventional monetary measures in reducing the credit interest rate under very general conditions. The comparison between measures reveals the outperformance of lending facilities over swap programs if i) the risk premium on the interbank money market is sizeable and the yield on government bonds is low, ii) the share of bank lending obtained from the central bank is below some specific threshold, iii) the interest rate offered by the central bank on excess reserves is high, and iv) the default rate on loans is high. The quantitative assessment of the model with real data confirms the appropriate response of the Federal Reserve in recent crisis episodes but sheds some doubts on the European Central Bank intervention