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The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria

  • Philipp Engler

    ()

  • Terhi Jokipii

    ()

  • Christian Merkl

    ()

  • Pablo Rovira Kaltwasser

    ()

  • Lúcio Vinhas de Souza

    ()

This paper analyzes the role of bank capitalization on the transmission of monetary policy, using a quarterly dataset for Austrian banks spanning from 1997 to 2003. A substantial understanding of the transmission mechanism in different countries of the euro zone is not only of academic interest, but also an important prerequisite for central bankers to effectively accomplish their monetary policy goals. While we do find evidence in favor of the bank lending channel, with an important role active for capitalization, we are unable to confirm whether the bank capital channel is in force in Austria. Our results indicate some counter-cyclicality in lending activity, a finding that is in line with the existing Austrian literature.

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File URL: http://hdl.handle.net/10.1007/s10663-007-9041-4
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Article provided by Springer in its journal Empirica.

Volume (Year): 34 (2007)
Issue (Month): 5 (December)
Pages: 411-425

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Handle: RePEc:kap:empiri:v:34:y:2007:i:5:p:411-425
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  1. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
  2. Christian Merkl & Stephanie Stolz, 2009. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2013-2024.
  3. Marvin Goodfriend & Bennett T. McCallum, 2007. "Banking and Interest Rates in Monetary Policy Analysis: A Quantitative Exploration," NBER Working Papers 13207, National Bureau of Economic Research, Inc.
  4. Heid, Frank & Porath, Daniel & Stolz, Stéphanie, 2004. "Does capital regulation matter for bank behaviour? Evidence for German savings banks," Discussion Paper Series 2: Banking and Financial Studies 2004,03, Deutsche Bundesbank, Research Centre.
  5. Philipp Engler,Terhi Jokipii,Christian Merkl & Pablo Rovira Kaltwasser,Lúcio Vinhas de Souza, 2005. "The Effect of Capital Requirement Regulation on the Transmission of Monetary Policy: Evidence from Austria," The Institute for International Integration Studies Discussion Paper Series iiisdp066, IIIS.
  6. Leonardo Gambacorta & Paolo Emilio Mistrulli, 2003. "Bank Capital and Lending Behaviour: Empirical Evidence for Italy," Temi di discussione (Economic working papers) 486, Bank of Italy, Economic Research and International Relations Area.
  7. Michael Ehrmann & Andreas Worms, 2004. "Bank Networks and Monetary Policy Transmission," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 1148-1171, December.
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