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Legal structure, financial structure, and the monetary policy transmission mechanism

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  • Stephen G. Cecchetti

Abstract

Among the many challenges facing the new Eurosystem - the European Central Bank and the central banks of the eleven members of the European Monetary Union - is the possibility that participating countries will respond differently to interest rate changes. This paper provides evidence that differences in financial structure are the proximate cause for these national asymmetries in monetary policy transmission and that these differences in financial structure are a result of differences in legal structure. The author concludes that unless legal structures are harmonized across Europe, the financial structures and monetary transmission mechanisms of the European Union countries will remain diverse

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (1999)
Issue (Month): Jul ()
Pages: 9-28

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Handle: RePEc:fip:fednep:y:1999:i:jul:p:9-28:n:v.5no.2

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Keywords: European Central Bank ; European Monetary System (Organization) ; Monetary policy - Europe ; Europe;

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  1. Erica L. Groshen & Mark E. Schweitzer, 1997. "Identifying Inflation's Grease and Sand Effects in the Labor Market," NBER Working Papers 6061, National Bureau of Economic Research, Inc.
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  11. Michael Ehrmann, 2000. "Comparing monetary policy transmission across European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(1), pages 58-83, March.
  12. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 123-166 National Bureau of Economic Research, Inc.
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  15. Stefan Gerlach & Frank Smets, 1995. "The monetary transmission mechanism: Evidence from the G-7 countries," BIS Working Papers 26, Bank for International Settlements.
  16. Stephen G. Cecchetti & Margaret M. McConnell & Gabriel Perez Quiros, 1999. "Policymakers' revealed preferences and the output-inflation variability trade-off: implications for the European system of central banks," Proceedings, Federal Reserve Bank of San Francisco.
  17. R. Glenn Hubbard, 1995. "Is there a "credit channel" for monetary policy?," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 63-77.
  18. R. Glenn Hubbard, 1994. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
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