Financial Sector Interconnectedness and Monetary Policy Transmission

Alessandro Barattieri, Maya Eden () and Dalibor Stevanovic

No 436, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We document that, in the U.S., the share of financial assets that have a direct counterpart in the financial system has increased by between 15.8 and 21.8 percentage points during the period 1952-2011. Using a SVAR and a FAVAR, we find that, during the same period, the impulse responses of several real and financial variables to monetary policy shocks dampened. To relate these two trends, we present a stylized model that illustrates how interbank trading can reduce the sensitivity of lending to the entrepreneur's net worth, thus affecting the transmission mechanism of monetary policy through the credit channel.

Keywords: Financial sector interconnectedness; monetary policy transmission mechanism (search for similar items in EconPapers)
JEL-codes: E44 E52 G20 (search for similar items in EconPapers)
Pages: pages 46
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: FINANCIAL SECTOR INTERCONNECTEDNESS AND MONETARY POLICY TRANSMISSION (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:436

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