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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 is the possibility that the regions of the euro area will respond differently to interest rate changes. In this essay, I provide evidence that differences in financial structure are the proximate cause for these national asymmetries in the monetary policy transmission mechanism, and that these differences in financial structure are a result of differences in legal structure. My conclusion is 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7151.

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Date of creation: Jun 1999
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Handle: RePEc:nbr:nberwo:7151

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  1. Michael Ehrmann, 2000. "Comparing monetary policy transmission across European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(1), pages 58-83, March.
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  17. repec:fip:fedlpr:y:1995:i:may:p:83-97 is not listed on IDEAS
  18. 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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