Monetary Policy Effects: New Evidence from the Italian Flow of Funds

Riccardo Bonci and Francesco Columba

No 678, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We obtain new evidence on the transmission of monetary policy to the economy by analyzing the effects of restrictive monetary policy shocks on Italian flows of funds over the period 1980-2002. Firms reduce their issuance of debt and their acquisitions of financial assets, so there is no evidence of strong financial frictions. Households increase short-term liabilities and diminish purchases of liquid assets and shares in the first quarter following a shock. The public sector increases net borrowing during the first two years. Financial corporations decrease their borrowing for three quarters, while the foreign sector increases borrowed funds. The results shed new light on the role played by the financial decisions of the various economic sectors in the transmission of monetary policy.

Keywords: flow of funds; monetary policy; VAR (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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Journal Article: Monetary policy effects: new evidence from the Italian flow-of-funds (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_678_08

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