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Financial systems and the role of banks in monetary policy transmission in the Euro area

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Author Info
Michael Ehrmann () (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.)
Leonardo Gambacorta () (Banca d'Italia, Via Nazionale 91, 00184 Rome, Italy.)
Jorge Martinez-Pages () (Banco de Espana, Alcala 50, E-28014 Madrid, Spain.)
Patrick Sevestre () (University of Paris XII Val de Marne, 61 avenue du General de Gaulle, 94010 Paris Creteil cedex, France.)
Andreas Worms () (Deutsche Bundesbank, Economics Department, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt am Main, Germany.)

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Abstract

This paper offers a comprehensive comparison of the structure of banking and financial markets in the euro area. Based on this, several hypotheses about the role of banks in monetary policy transmission are developed. Many of the predictions that have been proposed for the U.S. are deemed unlikely to apply in Europe. Testing these hypotheses we find that monetary policy does alter bank loan supply, with the effects most dependent on the liquidity of individual banks. Unlike in the US, the size of a bank does generally not explain its lending reaction. We also show that the standard publicly available database, BankScope, obscures the heterogeneity across banks. Indeed, for several types of questions Bank-scope data suggest very different answers than more complete data that reside at national central banks. JEL Classification: C23; E44; E52; G21.

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Paper provided by European Central Bank in its series Working Paper Series with number 105.

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Length: 60 pages
Date of creation: Dec 2001
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Handle: RePEc:ecb:ecbwps:20010105

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Related research
Keywords: Monetary policy transmission; financial structure; bank lending.;

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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. Benoît Mojon, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 40, European Central Bank. [Downloadable!]
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    Other versions:
  3. Reint Gropp & Sandrine Corvoisier, 2001. "Bank concentration and retail interest rates," Working Paper Series 072, European Central Bank. [Downloadable!]
    Other versions:
  4. Altunbas, Yener & Fazylov, Otabek & Molyneux, Philip, 2002. "Evidence on the bank lending channel in Europe," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2093-2110, November. [Downloadable!] (restricted)
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  9. Stephen G. Cecchetti, 1999. "Legal structure, financial structure, and the monetary policy transmission mechanism," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 9-28. [Downloadable!]
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  10. Maria Luisa Alcoforado Farinha & Carlos Robalo Marques, 2001. "The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data," Working Paper Series 102, European Central Bank. [Downloadable!]
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  11. 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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  12. Mishkin, Frederic S, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall. [Downloadable!] (restricted)
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  19. Sophocles N. Brissimis & Nicos C. Kamberoglou & George T. Simigiannis, 2001. "Is there a Bank lending channel of monetary policy in Greece? Evidence from bank level data," Working Paper Series 104, European Central Bank. [Downloadable!]
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  26. 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!]
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  28. Michael Ehrmann & Andreas Worms, 2001. "Interbank lending and monetary policy transmission - evidence for Germany," Working Paper Series 073, European Central Bank. [Downloadable!]
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  29. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons from the East Asian Crisis," CRSP working papers 486, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
    Other versions:
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