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The Role of Banks in the Transmission of Monetary Policy in the Baltics

  • Köhler, Matthias
  • Hommel, Judith
  • Grote, Matthias
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    The paper empirically investigates the monetary transmission mechanism in the Baltic States. The analysis of the transmission channels through which monetary policy shocks are transmitted is particularly important for the European Central Bank that makes monetary policy in an enlarged European Monetary Union. The paper focuses on the bank lending channel of monetary transmission due to the importance of banks in the financial system of the Baltic countries. The existence of this transmission channel is tested by using a panel structural approach that distinguishes banks according to size, capitalization, liquidity and ownership structure. The results indicate that a bank lending channel is present in the Baltic States and mainly caused by differences in liquidity.

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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-05.

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    Date of creation: 2006
    Date of revision:
    Handle: RePEc:zbw:zewdip:4584
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    1. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
    2. Ehrmann, Michael & Gambacorta, Leonardo & Martinéz Pagés, Jorge & Sevestre, Patrick & Worms, Andreas, 2001. "Financial systems and the role of banks in monetary policy transmission in the euro area," Working Paper Series 0105, European Central Bank.
    3. Berger, Allen N. & Klapper, Leora F. & Udell, Gregory F., 2001. "The ability of banks to lend to informationally opaque small businesses," Policy Research Working Paper Series 2656, The World Bank.
    4. Reimo Juks, 2004. "The importance of the bank-lending channel in Estonia: evidence from micro-economic data," Bank of Estonia Working Papers 2004-6, Bank of Estonia, revised 11 Nov 2004.
    5. Skander J. van den Heuvel, 2002. "Does bank capital matter for monetary transmission?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 259-265.
    6. Allen, Franklin & Laura, Bartiloro & Oskar, Kowalewski, 2005. "The Financial System of the EU 25," MPRA Paper 652, University Library of Munich, Germany.
    7. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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