The Transmission of the Monetary Policy in the Euro Area: The Role of the Banks’ Business Model

20 Pages Posted: 15 Aug 2017

See all articles by Marco Migliorelli

Marco Migliorelli

Université Paris I Panthéon-Sorbonne

Sandro Brunelli

University of Rome Tor Vergata - Faculty of Economics

Date Written: September 2017

Abstract

This paper sheds some new light on the incidence of the banks’ business model as a component of the bank lending channel in the euro area. Differently from existing literature, the analysis is led on the basis of the two main macroeconomic regions that today characterize the euro area: its north‐east (German‐centric) and south‐west halves. The observation period is 2008–2013, mainly featured by the financial and economic crisis. The empirical findings evidence that in the north‐east half of the euro area the cooperative banks leveraged the effects of the reduction in the interest rates in terms of new lending. In this respect, they differentiated from commercial and savings banks, which showed a more neutral impact on the transmission of the monetary policy decisions. These results highlight the distinctive role of the cooperative banks in terms of credit provision in Germany and in the whole north‐east half of the euro area. Nevertheless, this cooperative banking effect did not emerge for the south‐west half of the continent, particularly hit by the crisis. This may suggest that the bank's business model tend to be neutral to the transmission of the monetary policy in economies characterized by prolonged recessions.

Keywords: Euro area, monetary policy transmission, bank lending channel, cooperative banks

JEL Classification: G21, E51

Suggested Citation

Migliorelli, Marco and Brunelli, Sandro, The Transmission of the Monetary Policy in the Euro Area: The Role of the Banks’ Business Model (September 2017). Annals of Public and Cooperative Economics, Vol. 88, Issue 3, pp. 303-322, 2017, Available at SSRN: https://ssrn.com/abstract=3018847 or http://dx.doi.org/10.1111/apce.12144

Marco Migliorelli (Contact Author)

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Sandro Brunelli

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

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