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Cross-country asymmetries in euro area monetary transmission: the role of national financial systems

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  • Putkuri , Hanna

    ()
    (Bank of Finland)

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    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.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0315.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland in its series Research Discussion Papers with number 15/2003.

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    Length: 118 pages
    Date of creation: 13 May 2003
    Date of revision:
    Handle: RePEc:hhs:bofrdp:2003_015

    Contact details of provider:
    Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/
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    Related research

    Keywords: EMU; monetary transmission; bank lending channel; panel data analysis;

    References

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    Cited by:
    1. Jérôme Creel* & Sandrine Levasseur, 2007. "Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 30-59, February.
    2. De Grauwe, Paul & Senegas, Marc-Alexandre, 2006. "Monetary policy design and transmission asymmetry in EMU: Does uncertainty matter?," European Journal of Political Economy, Elsevier, vol. 22(4), pages 787-808, December.
    3. Alves, Nuno, 2008. "The mechanics of a monetary union with segmented financial markets," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 346-368, March.
    4. repec:spo:wpecon:info:hdl:2441/2976 is not listed on IDEAS

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