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Interbank lending and monetary policy transmission - evidence for Germany

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Author Info
Michael Ehrmann () (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.)
Andreas Worms () (Deutsche Bundesbank, Economics Department, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt am Main, Germany.)

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Abstract

This paper presents empirical evidence on the behaviour of interbank lending in Germany after a monetary policy impulse. Our VAR analysis shows that following a monetary contraction, the banking system as a whole attracts additional funds from foreign banks. Whereas small cooperative and savings banks do not seem to directly access the interbank market themselves, they do so indirectly through the head institutions of their sectors, i.e. the savings banks' and credit cooperative sector, respectively. The interbank flows within these two sectors allow small banks to access funds that might help them in keeping their loan portfolio relatively unaffected. This may explain why the evidence for a bank lending channel in Germany seems to be weaker compared to other countries, e.g. the US. JEL Classification: C32; E52; G21.

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Paper provided by European Central Bank in its series Working Paper Series with number 073.

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Length: 48 pages
Date of creation: Jul 2001
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Handle: RePEc:ecb:ecbwps:20010073

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Related research
Keywords: monetary policy; bank lending channel; interbank market.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements. [Downloadable!]
  2. Anil K. Kashyap & Jeremy C. Stein, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June. [Downloadable!] (restricted)
  3. Angeloni,I. & Buttiglione,L. & Ferri,G. & Gaiotti,E., 1995. "The Credit Channel of Policy Across Heterogeneous Banks:the Case of Italy," Papers 256, Banca Italia - Servizio di Studi.
  4. Elsas, Ralf & Krahnen, Jan Pieter, 1998. "Is relationship lending special? Evidence from credit-file data in Germany," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1283-1316, October. [Downloadable!] (restricted)
  5. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March. [Downloadable!] (restricted)
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  6. Favero, Carlo A & Flabbi, Luca & Giavazzi, Francesco, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets," CEPR Discussion Papers 2303, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Stephen G. Cecchetti, 1995. "Distinguishing theories of the monetary transmission mechanism," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 83-97. [Downloadable!]
  8. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October. [Downloadable!] (restricted)
  9. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ralph de Haas & Ilko Naaborg, 2005. "Internal Capital Markets in Multinational Banks: Implications for European Transition Countries," DNB Working Papers 051, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Weth, Mark A., 2002. "The pass-through from market interest rates to bank lending rates in Germany," Discussion Paper Series 1: Economic Studies 2002,11, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Andreas Worms, 2003. "Interbank Relationships and the Credit Channel in Germany," Empirica, Springer, vol. 30(2), pages 179-198, June. [Downloadable!] (restricted)
  4. Rocío Betancourt & Hernando Vargas & Norberto Rodríguez Niño, 2006. "Interest Rate Pass-Through In Colombia: A Micro- Banking Perspective," BORRADORES DE ECONOMIA 002909, BANCO DE LA REPÚBLICA. [Downloadable!]
    Other versions:
  5. Robert-Paul Berben & Alberto Locarno & Julian Morgan & Javier Vallés, 2005. "Cross-country differences in monetary policy transmission," Banco de España Working Papers 0502, Banco de España. [Downloadable!]
    Other versions:
  6. Ignazio Angeloni, 2002. "Financial consolidation and monetary policy : commentary," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 285-289. [Downloadable!]
  7. Cobham, Alex, 2001. "EMU, Monetary Policy and the Role of Financial Constraints," EIFC - Technology and Finance Working Papers 6, United Nations University, Institute for New Technologies. [Downloadable!]
  8. Norden, Lars & Weber, Martin, 2005. "Funding Modes of German Banks: Structural Changes and its Implications," CEPR Discussion Papers 5027, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Thomas Meyer & Carlos Vieira & Isabel Vieira & Jaakko Kiander & Vladimir Lavrac & Massimiliano Marzo, 2002. "The Eastward Enlargement of the Eurozone: The Shaping of Capital Markets. Regional Inputs on Data and Statistic," Eastward Enlargement of the Euro-zone Working Papers wp05a, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002. [Downloadable!]
  10. Ignazio Angeloni & Benoit Mojon & Anil K. Kashyap & Daniele Terlizzese, 2002. "Monetary transmission in the Euro Area: where do we stand?," Working Paper Series 114, European Central Bank. [Downloadable!]
  11. Benedict J. Clements & Zenon Kontolemis G. & Joaquim Vieira Ferreira Levy, 2001. "Monetary Policy Under EMU: Differences in the Transition Mechanism?," IMF Working Papers 01/102, International Monetary Fund. [Downloadable!]
  12. Ralph de Haas & Ilko Naaborg, 2005. "Foreign Banks in Transition Economies: Small Business Lending and Internal Capital Markets," International Finance 0504004, EconWPA. [Downloadable!]
  13. Michael Ehrmann & Leonardo Gambacorta & Jorge Martìnez-Pagès & Patrick Sevestre & Andreas Worms, 2001. "Fynancial Systems and the Role of Banks in Monetary Policy Transmission in the Euro area," Temi di discussione (Economic working papers) 432, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
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