N°26-08: Monetary Policy and SME Expectations

We investigate the impact of monetary policy on the growth and financing expectations of euro area SMEs. Using firm-level data from the ECB's Survey on Access to Finance of Enterprises (SAFE) from 2009 to 2024, we distinguish between conventional interest rate adjustments and unconventional measures. While conventional tightening consistently dampens expectations regarding turnover and credit, unconventional easing elicits ambiguous responses, consistent with a signalling channel where interventions are interpreted as indicators of future macroeconomic distress. Heterogeneity analysis reveals that firm size, credit history, and borrowing constraints significantly moderate these effects. We find that the interest rate and inflation expectation channels dominate transmission, whereas the bank-lending channel plays a subordinate role. These results suggest that the signalling effects of unconventional policy may dampen its efficacy for constrained firms.