Monetary Transmission in the Euro Area: Where Do We Stand?

Anil Kashyap, Benoit Mojon, Daniele Terlizzese and Peter Backé

No 114, Working Paper Series from European Central Bank

Abstract: Drawing on recent Eurosystem research that uses a range of econometric techniques and a number of new data sets, we propose a comprehensive description of how monetary policy affects the euro area economy. We focus mainly on three questions: (1) what are the stylised facts concerning the transmission of monetary policy for the area as a whole and for individual countries? (2) can the 'classic' interest rate channel (IRC) alone, without capital market imperfections, explain these facts? (3) if not, is the bank lending channel a likely candidate to complete the story? We find plausible euro-area wide monetary policy responses for prices and output that are similar to those generally reported for the US. However, investment (relative to consumption) seems to play a larger role in euro area monetary policy transmission than in the US. We cannot reject the hypothesis that the IRC completely characterises transmission in a few countries, and estimate it to be substantial in almost all. Where the IRC is not dominant, there is normally some direct evidence supporting the presence of a bank lending channel (or other financial transmission channel). The cases where financial effects appear important can be further split according to whether they primarily relate to consumption or investment JEL Classification: E52, E58, E44

Keywords: bank lending; euro area; monetary policy; transmission mechanism (search for similar items in EconPapers)
Date: 2002-01
Note: 1792986
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (205)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp114.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2002114

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().