Research Discussion Papers, Bank of Finland
No 15/2003:
Cross-country asymmetries in euro area monetary transmission: the role of national financial systems
Hanna Putkuri ()
Abstract: Since 1 January 1999 the ECB has conducted a single
monetary policy in the euro area, but the mechanisms by which and the
extent to which monetary shocks are transmitted into prices and real
economic activity may vary from country to country. This paper investigates
how and to what extent the impact of monetary policy depends on national
features of financial systems. The main interest is in examining whether
the bank lending channel of monetary policy results in asymmetric loan
supply reactions on the aggregate level across countries.
The variety
of transmission mechanisms suggests that the potency of monetary policy may
depend on several country-specific factors. On the basis of descriptive
analysis, the present Member States seem to differ considerably in terms of
their financial systems. The econometric analysis using aggregate data on a
panel of twelve countries supports the view that some of these differences
may lead to cross-country asymmetries in responses to the common monetary
policy. In particular, a larger size and a lower degree of capitalisation
of a banking sector are found to strengthen the bank lending channel on the
aggregate level.
Keywords: EMU; monetary transmission; bank lending channel; panel data analysis; (follow links to similar papers)
118 pages, May 13, 2003
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