Whatever it takes: The Real Effects of Unconventional Monetary Policy

On July 26, 2012 Mario Draghi announced to do ``whatever it takes'' to preserve the Euro. The resulting Outright Monetary Transactions (OMT) Program led to a significant reduction in the sovereign yields of periphery countries. We document that, due to their large holdings of domestic sovereign debt, banks in the periphery benefited from the OMT announcement and experienced a significant increase in their equity value and a significant reduction in their CDS spreads. This led to an increased supply of loans to private borrowers in Europe. We show that firms with lending relationships to banks that benefited from the OMT announcement increase  their cash holdings after receiving new loans, but show no significant increase in real activities, like employment and investment.