Monetary Policy Transmission in the Euro Area: New Evidence From Micro Data on Firms and Banks
Jean-Bernard Chatelain (),
Michael Ehrmann (),
Philip Vermeulen () and
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Andrea Generale: Banca d'Italia, Generale:
Jorge Martínez-Pagés: Banco de Espanña, Martínez-Pagés:
Andreas Worms: Deutsche Bundesbank, Worms:
Journal of the European Economic Association, 2003, vol. 1, issue 2-3, 731-742
This paper presents an overview of the results of a research project on monetary transmission pursued by the Eurosystem, which has analyzed micro data on firms and banks in several countries of the euro area in great detail. There is strong empirical support for an interest rate channel working through firm investment. Furthermore, a credit channel can be identified with firm micro data. On the bank side, there is evidence that lending reacts differently to monetary policy according to bank balance sheet characteristics. In particular, banks that have a less liquid asset composition show a stronger loan supply response. This finding may be due to banks drawing on their liquid assets to cushion the effects of monetary policy on their loan portfolio, which is in line with the existence of close relationships between banks and their loan customers. (JEL: C23, E52, G21) Copyright (c) 2003 The European Economic Association.
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