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Heterogeneous "Credit Channels" and Optimal Monetary Policy in a Monetary Union

Author

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  • Gambacorta, L.

Abstract

The process of European monetary integration has prompted interest in the study of differences in financial systems and their consequences for monetary transmission mechanisms. This paper analyses the case of a monetary union composed of countries with heterogeneous "credit channels". In order to better insulate the economies from the asymmetric effects produced by differences in national financial systems, a money supply process based on the interest rate on bonds and its spread with respect to the bank lending rate is proposed. Using a two-country rational expectations model, this study highlights the properties of optimal monetary instrument with respect to a wide range of stochastic disturbances.

Suggested Citation

  • Gambacorta, L., 1998. "Heterogeneous "Credit Channels" and Optimal Monetary Policy in a Monetary Union," Papers 340, Banca Italia - Servizio di Studi.
  • Handle: RePEc:fth:banita:340
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    Cited by:

    1. Siviero, S. & Terlizzese, D. & Visco, I., 1999. "Are Model-Based Inflation Forecasts Used in Monetary Policymaking? A Case Study," Papers 357, Banca Italia - Servizio di Studi.
    2. Marco Mazzoli, 2001. "A simple enquiry on heterogeneous lending rates and lending behaviour," Heterogeneity and monetary policy 0105, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica.
    3. Christophe Hurlin & Rafal Kierzenkowski, 2002. "A Theoretical and Empirical Assessment of the Bank Lending Channel and Loan Market Disequilibrium in Poland," NBP Working Papers 22, Narodowy Bank Polski, Economic Research Department.

    More about this item

    Keywords

    CREDIT ; MONEY ; FINANCIAL MARKET ; EUROPE;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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