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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
Sevestre, Patrick
Martinez-Pages, Jorge
Gambacorta, Leonardo
Ehrmann, Michael
Worms, Andreas

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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 BankScope data suggest very different answers than more complete data that reside at national central banks.

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Publisher Info
Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2001,18.

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Date of creation: 2001
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Handle: RePEc:zbw:bubdp1:4163

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Related research
Keywords: monetary policy transmission; financial structure; bank lending;

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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
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  3. Reint Gropp & Sandrine Corvoisier, 2001. "Bank concentration and retail interest rates," Working Paper Series 072, European Central Bank. [Downloadable!]
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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!]
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