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The ECB and the Interbank Market

  • Domenico Giannone
  • Michele Lenza
  • Huw Pill
  • Lucrezia Reichlin

We analyse the impact on the euro area economy of the ECB’s non-standard monetary policy measures by studying the effect of the expansion of intermediation of interbank transactions across the central bank balance sheet. We exploit data drawn from the aggregated Monetary and Financial Institutions (MFI) balance sheet, which allows us to construct a measure of the ‘policy shock’ represented by the ECB’s increasing role as a financial intermediary. We find small but significant effects both on loans and real economic activity. JEL Classification: E5, E58

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 122 (2012)
Issue (Month): 564 (November)
Pages: F467-F486

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Handle: RePEc:ecj:econjl:v:122:y:2012:i:564:p:f467-f486
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  1. Marta Banbura & Domenico Giannone & Lucrezia Reichlin, 2010. "Large Bayesian vector auto regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(1), pages 71-92.
  2. Stephan Fahr & Roberto Motto & Massimo Rostagno & Frank Smets & Oreste Tristani, 2011. "Lessons for monetary policy strategies from the recent past," Chapters, European Central Bank.
  3. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
  4. Giannone, Domenico & Lenza, Michele & Pill, Huw & Reichlin, Lucrezia, 2011. "Non-standard monetary policy measures and monetary developments," Working Paper Series 1290, European Central Bank.
  5. Gary B. Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," NBER Working Papers 15223, National Bureau of Economic Research, Inc.
  6. Domenico Giannone & Michele Lenza & Giorgio E. Primiceri, 2012. "Prior Selection for Vector Autoregressions," NBER Working Papers 18467, National Bureau of Economic Research, Inc.
  7. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  8. De Mol, Christine & Giannone, Domenico & Reichlin, Lucrezia, 2006. "Forecasting using a large number of predictors: Is Bayesian regression a valid alternative to principal components?," Working Paper Series 0700, European Central Bank.
  9. Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2010. "Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk," CEPR Discussion Papers 7762, C.E.P.R. Discussion Papers.
  10. Lenza, Michele & Pill, Huw & Reichlin, Lucrezia, 2010. "Monetary policy in exceptional times," Working Paper Series 1253, European Central Bank.
  11. Marta Bańbura, 2008. "Large Bayesian VARs," 2008 Meeting Papers 334, Society for Economic Dynamics.
  12. Hyun Song Shin & Kwanho Shin, 2011. "Procyclicality and Monetary Aggregates," NBER Working Papers 16836, National Bureau of Economic Research, Inc.
  13. Adrian, Tobias & Shin, Hyun Song, 2010. "Liquidity and leverage," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 418-437, July.
  14. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
  15. Walsh, Carl E., 1982. "Asset substitutability and monetary policy : An alternative characterization," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 59-71.
  16. A Durré & H Pill, 2012. "Central Bank balance sheets as policy tools," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 193-213 Bank for International Settlements.
  17. repec:cup:cbooks:9781107014732 is not listed on IDEAS
  18. Joyce, Michael & Lasaosa, Ana & Stevens , Ibrahim & Tong, Matthew, 2010. "The financial market impact of quantitative easing," Bank of England working papers 393, Bank of England.
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