Bank-Specific Characteristics and Monetary Policy Transmission: The Case of Italy

42 Pages Posted: 17 Dec 2002

See all articles by Leonardo Gambacorta

Leonardo Gambacorta

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

Date Written: December 2001

Abstract

This paper tests cross-sectional differences in the effectiveness of the bank lending channel of monetary policy in Italy from 1986 to 1998 using a panel approach. After a monetary tightening the decrease in deposits subject to reserve requirements is sharper for those banks that have less incentive to shield the effect of a monetary squeeze: small banks characterized by a higher ratio of deposits to loans and well-capitalized banks that have a greater capacity to raise other forms of external funds. As to lending, size does not affect the banks' reaction to a monetary policy impulse. This can be explained by a closer customer relationship, which provides an incentive for small banks, which are more liquid on average, to smooth the effects of a tightening on credit supplied. Banks' liquidity is the most significant factor enabling them to attenuate the effect of a decrease in deposits on lending.

Keywords: Monetary policy, transmission mechanisms, bank lending channel

JEL Classification: E44, E51, E52

Suggested Citation

Gambacorta, Leonardo, Bank-Specific Characteristics and Monetary Policy Transmission: The Case of Italy (December 2001). Available at SSRN: https://ssrn.com/abstract=356642

Leonardo Gambacorta (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
258
Abstract Views
1,596
rank
129,989
PlumX Metrics