Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area

50 Pages Posted: 21 Dec 2010

See all articles by Michael Ehrmann

Michael Ehrmann

European Central Bank (ECB); Bank of Canada

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Patrick Sevestre

Aix-Marseille University

Andreas Worms

Deutsche Bundesbank, Economics Department

Jorge Martinez

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: November 1, 2002

Abstract

This paper offers a comprehensive comparison of the structure of banking and financial markets in the euro area. Based on this, several hypotheses about the role of banks in monetary policy transmission are developed. Many of the predictions that have been proposed for the U.S. are deemed unlikely to apply in Europe. Testing these hypotheses we find that monetary policy does alter bank loan supply, with the effects most dependent on the liquidity of individual banks. Unlike in the US, the size of a bank does generally not explain its lending reaction. We also show that the standard publicly available database, BankScope, obscures the heterogeneity across banks. Indeed, for several types of questions BankScope data suggest very different answers than more complete data that reside at national central banks.

Keywords: monetary policy transmission, financial structure, bank lending

JEL Classification: C23, E44, E52, G21

Suggested Citation

Ehrmann, Michael and Gambacorta, Leonardo and Sevestre, Patrick and Worms, Andreas and Martinez, Jorge, Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area (November 1, 2002). Banque de France Working Paper No. 93, Available at SSRN: https://ssrn.com/abstract=1728767 or http://dx.doi.org/10.2139/ssrn.1728767

Michael Ehrmann (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344/7327 (Phone)
+49 69 1344/6000 (Fax)

Bank of Canada ( email )

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Canada

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Patrick Sevestre

Aix-Marseille University ( email )

3 Avenue Robert Schuman
3 Avenue Robert Schuman,
Aix-en-Provence, 13628
France

Andreas Worms

Deutsche Bundesbank, Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Jorge Martinez

affiliation not provided to SSRN ( email )

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