One Size May Not Fit All: Banking Fragmentation and European Monetary Policies

48 Pages Posted: 5 May 2020 Last revised: 9 Jun 2022

See all articles by Marie-Hélène Gagnon

Marie-Hélène Gagnon

Université Laval - Faculté d'Administration

Céline Gimet

Institut d’Etudes Politiques d’Aix-en-Provence Sciences Po Aix and Aix Marseille Univ, CNRS, AMSE, Marseille, France

Date Written: June 18, 2021

Abstract

This paper investigates the impact of ECB policies on credits considering financial and banking fragmentation. Using European data from the past decade, we estimate SVAR models to analyse the regional impact of conventional and unconventional measures on price and volume indicators of fragmentation. The risk-taking channel is studied using GVAR models to document the national consequences of this fragmentation. We find that unconventional measures increase credit volumes in peripheral countries. Monetary policies alleviate financial and banking fragmentation, but mostly in terms of price dispersion rather than credit volume. Finally, unconventional measures imply a rebalancing of European bank assets in favour of foreign currency denominated assets. .

Keywords: Financial fragmentation, banking fragmentation, risk-taking channel, monetary policy

JEL Classification: E44, E50, F36, F42, F45

Suggested Citation

Gagnon, Marie-Hélène and Gimet, Céline, One Size May Not Fit All: Banking Fragmentation and European Monetary Policies (June 18, 2021). Available at SSRN: https://ssrn.com/abstract=3590286 or http://dx.doi.org/10.2139/ssrn.3590286

Marie-Hélène Gagnon (Contact Author)

Université Laval - Faculté d'Administration ( email )

Quebec G1K 7P4
Canada

Céline Gimet

Institut d’Etudes Politiques d’Aix-en-Provence Sciences Po Aix and Aix Marseille Univ, CNRS, AMSE, Marseille, France ( email )

Aix-en-Provence
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
172
Abstract Views
1,667
Rank
260,802
PlumX Metrics