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Bank-specific characteristics and monetary policy transmission: the case of Italy

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Author Info
Leonardo Gambacorta () (Banca d'Italia, Via Nazionale 91, 00184 Rome, Italy.)

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Abstract

This paper tests cross-sectional differences in the effectiveness of the bank lending channel of monetary policy in Italy from 1986 to 1998 using a panel approach. After a monetary tightening the decrease in deposits subject to reserve requirements is sharper for those banks that have less incentive to shield the effect of a monetary squeeze: small banks characterized by a higher ratio of deposits to loans and well-capitalized banks that have a greater capacity to raise other forms of external funds. As to lending, size does not affect the banks' reaction to a monetary policy impulse. This can be explained by a closer customer relationship, which provides an incentive for small banks, which are more liquid on average, to smooth the effects of a tightening on credit supplied. Banks' liquidity is the most significant factor enabling them to attenuate the effect of a decrease in deposits on lending. JEL Classification: E44; E51; E52.

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Paper provided by European Central Bank in its series Working Paper Series with number 103.

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Length: 42 pages
Date of creation: Dec 2001
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Handle: RePEc:ecb:ecbwps:20010103

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Keywords: Monetary policy; transmission mechanisms; bank lending channel.;

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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.:
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  3. 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)
  4. Carlo Cottarelli & Giovanni Ferri & Andrea Generale, 1995. "Bank Lending Rates and Financial Structure in Italy: A Case Study," IMF Working Papers 95/38, International Monetary Fund.
  5. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13. [Downloadable!]
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  6. 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.
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  12. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August. [Downloadable!] (restricted)
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  15. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
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  17. L. de Haan, 2001. "The Credit Channel in the Netherlands: Evidence from Bank Balance Sheets," WO Research Memoranda (discontinued) 674, Netherlands Central Bank, Research Department. [Downloadable!]
  18. Anil K. Kashyap & Jeremy C. Stein, 1997. "The role of banks in monetary policy: a survey with implications for the European Monetary Union," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 2-18. [Downloadable!]
Full references

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. Giuliana Passamani & Roberto Tamborini, 2006. "Monetary policy through the “credit-cost channel”. Italy and Germany," Department of Economics Working Papers 0609, Department of Economics, University of Trento, Italia. [Downloadable!]
  2. Pietro Tommasino, 2006. "The Political Economy of Investor Protection," Temi di discussione (Economic working papers) 604, Bank of Italy, Economic Research Department. [Downloadable!]
  3. Andrea Nobili & Stefano Neri, 2006. "The transmission of monetary policy shocks from the US to the euro area," Temi di discussione (Economic working papers) 606, Bank of Italy, Economic Research Department. [Downloadable!]
  4. Mario Quagliariello, 2007. "Macroeconomic uncertainty and banks' lending decisions: The case of Italy," Temi di discussione (Economic working papers) 615, Bank of Italy, Economic Research Department. [Downloadable!]
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  5. Stefano Federico & Gaetano Alfredo Minerva, 2007. "Outward FDI and local employment growth in Italy," Temi di discussione (Economic working papers) 613, Bank of Italy, Economic Research Department. [Downloadable!]
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  6. Fabio Busetti & Andrew Harvey, 2007. "Testing for trend," Temi di discussione (Economic working papers) 614, Bank of Italy, Economic Research Department. [Downloadable!]
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  7. Luca Dedola & Stefano Neri, 2006. "What does a technology shock do? A VAR analysis with model-based sign restrictions," Temi di discussione (Economic working papers) 607, Bank of Italy, Economic Research Department. [Downloadable!]
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  8. Claudia Biancotti & Leandro D'Aurizio & Raffaele Tartaglia-Polcini, 2007. "A neural network architecture for data editing in the Bank of ItalyÂ’s business surveys," Temi di discussione (Economic working papers) 612, Bank of Italy, Economic Research Department. [Downloadable!]
  9. Massimiliano Affinito & Fabio Farabullini, 2006. "An empirical analysis of national differences in the retail bank interest rates of the euro area," Temi di discussione (Economic working papers) 589, Bank of Italy, Economic Research Department. [Downloadable!]
  10. Loupias, C. & Savignac, F. & Sevestre, P., 2002. "Is There a Bank lending Channel in France? Evidence From Bank Panel Data," Documents de Travail 92, Banque de France. [Downloadable!]
  11. Juri Marcucci & Mario Quagliariello, . "Is Bank Portfolio Riskiness Procyclical? Evidence from Italy using a Vector Autoregression," Discussion Papers 05/09, Department of Economics, University of York. [Downloadable!]
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  12. Roberto Golinelli & Sandro Momigliano, 2006. "Real-time determinants of fiscal policies in the euro area: Fiscal rules, cyclical conditions and elections," Temi di discussione (Economic working papers) 609, Bank of Italy, Economic Research Department. [Downloadable!]
  13. Ignazio Angeloni & Anil K. Kashyap & Benoit Mojon & Daniele Terlizzese, 2003. "Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All?," NBER Working Papers 9984, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research Department. [Downloadable!]
  15. Jean-Bernard Chatelain & Andrea Generale & Philip Vermeulen & Michael Ehrmann & Jorge Martínez-Pagés & Andreas Worms, 2003. "Monetary policy transmission in the euro area: New evidence from micro data on firms and banks," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00119489_v2, HAL. [Downloadable!]
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  16. 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!]
  17. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers) 451, Bank of Italy, Economic Research Department. [Downloadable!]
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  18. Sylvia Kaufmann, 2001. "Asymmetries in bank lending behavior: Austria during the 1990s," Working Paper Series 097, European Central Bank. [Downloadable!]
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  19. Filippo Vergara Caffarelli, 2006. "Merge and Compete. Strategic incentives for vertical integration," Temi di discussione (Economic working papers) 608, Bank of Italy, Economic Research Department. [Downloadable!]
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  20. Andrea Brandolini, 2007. "Measurement of income distribution in supranational entities: the case of the European Union," Temi di discussione (Economic working papers) 623, Bank of Italy, Economic Research Department. [Downloadable!]
  21. Elena Bontempi & Roberto Golinelli & Giuseppe Parigi, 2007. "Why demand uncertainty curbs investment: Evidence froma a panel of Italian manufacturing firms," Temi di discussione (Economic working papers) 621, Bank of Italy, Economic Research Department. [Downloadable!]
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