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Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area

  • Michael Ehrmann

    (European Central Bank)

  • Leonardo Gambacorta

    (Banca d’Italia)

  • Jorge Martínez-Pagés

    (Banco de España)

  • Patrick Sevestre

    (Banque de France)

  • Andreas Worms

    (Deutsche Bundesbank)

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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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0118.

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Length: 49 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:bde:wpaper:0118
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  23. Ignacio Hernando & Jorge Martínez Pagés, 2001. "Is There a Bank Lending Channel of Monetary Policy in Spain?," Banco de Espa�a Working Papers 0117, Banco de Espa�a.
  24. Topi, Jukka & Vilmunen, Jouko, 2001. "Transmission of monetary policy shocks in Finland: evidence from bank level data on loans," Working Paper Series 0100, European Central Bank.
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  27. Loupias, Claire & Savignac, Frédérique & Sevestre, Patrick, 2001. "Monetary policy and bank lending in France: are there asymmetries?," Working Paper Series 0101, European Central Bank.
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  29. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
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