One size may not fit all: Financial fragmentation and European monetary policies

Marie‐hélène Gagnon and Céline Gimet
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Marie‐hélène Gagnon: ULaval - Université Laval [Québec], CRREP - Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques - ULaval - Université Laval [Québec]

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Abstract: This article investigates the impact of European Central Bank policies on credits considering financial and banking fragmentation. Using European data from the past decade, we estimate SVAR models to analyze the regional impact of conventional and unconventional measures on price and volume indicators of fragmentation. The risk-taking channel is studied using GVAR models to document the national consequences of this fragmentation. We find that unconventional measures increase credit in peripheral countries. Monetary policies alleviate fragmentation, but mostly in terms of price dispersion rather than credit volume. Finally, unconventional measures imply a rebalancing of European bank assets in favor of foreign currency denominated-assets.

Keywords: banking fragmentation; financial fragmentation; monetary policy; risk-taking channel (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Published in Review of International Economics, 2023, 31 (1), pp.305-340. ⟨10.1111/roie.12627⟩

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Journal Article: One size may not fit all: Financial fragmentation and European monetary policies (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03777950

DOI: 10.1111/roie.12627

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