Monetary Policy Transmission in the Euro Area: New Evidence from Micro Data on Firms and Banks

Jean‐Bernard Chatelain · Michael Ehrmann · Andrea Generale · Jorge Martínez-Pagés · Philip Vermeulen · Andreas Worms

63 citations0/0 files storedJournal of the European Economic Association

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Economic theories and models

Abstract

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.

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References

1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1995Inside the Black Box: The Credit Channel of Monetary Policy Transmission 2002Government Ownership of Banks 2000What Do a Million Observations on Banks Say About the Transmission of Monetary Policy?1995The impact of monetary policy on bank balance sheets 1993Monetary Policy and Bank Lending 2010Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area 1999How responsive is business capital formation to its user cost?

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