This book offers the most systematic analysis available of the impact of European Central Bank monetary policy on the national economies of the Eurozone. There has been a large increase in research into better understanding how changes in monetary policy affect these economies since Central Banks have become accountable for meeting specific targets in inflation, output and employment. The research to date has largely focused on national central banks, pioneered by the study of the U.S. Federal Reserve Bank and the impacts of its policy decisions on the U.S. economy.
Author(s): Ignazio Angeloni, Anil K. Kashyap, Benoit Mojon
Year: 2004
Language: English
Pages: 516
Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Contributors......Page 11
Foreword......Page 13
Acknowledgements......Page 15
Abbreviations......Page 17
Introduction......Page 19
1.1 Area-wide versus country-level analysis......Page 20
1.3 Choice of data and economic sectors under investigation......Page 22
1.4 Choice of the modelling strategy......Page 23
2 Summary of findings......Page 24
3 Directions for future research......Page 27
4 Organisation of the research team......Page 28
Part 1 Macroeconometric evidence on the transmission mechanism in the euro area......Page 31
1 Introduction......Page 33
2 Our favourite filter for the European macroeconomic time series......Page 34
3 Data......Page 36
4.1 Business cycles of the euro area and EMU countries......Page 37
4.2 Aggregation......Page 42
5.1 Euro area and US growth and business cycle......Page 44
5.2 Further similarities with the US business cycle......Page 48
6 Conclusion......Page 51
APPENDIX......Page 52
1 Introduction......Page 54
2.1 The benchmark specification......Page 55
2.2 Basic estimation results......Page 56
3.1 Stability of the impulse responses over time......Page 60
3.2 Alternative identification schemes......Page 62
4.2 Components of GDP......Page 66
4.3 Monetary variables and asset prices......Page 67
4.4 Labour market variables......Page 69
4.5 Individual country effects......Page 70
5 Concluding remarks......Page 71
1 Introduction......Page 74
2 VAR models for the individual countries in the euro area: identification......Page 76
2.1 Germany......Page 77
2.2 Austria, Belgium and the Netherlands......Page 78
2.3 Finland, France, Greece, Ireland, Italy and Spain......Page 79
3.1 Estimation......Page 80
3.2 The effects of monetary policy on prices, GDP and the exchange rate......Page 81
3.3 Pre-EMU ‘euro area monetary policy’ and national monetary policy histories......Page 85
4 Concluding remarks......Page 92
1 Introduction......Page 93
1.1 The monetary policy transmission mechanism......Page 94
2 Design of monetary policy transmission simulation experiment.......Page 96
3.1 The results......Page 98
3.2 Channels of transmission......Page 105
4 Conclusions......Page 107
1 Introduction......Page 109
2 Channels of transmission......Page 110
3 The monetary policy experiment......Page 112
4.1 Impact on prices......Page 113
4.2 Impact on real activity......Page 117
5 Validation of the results and policy issues......Page 120
6 Conclusions......Page 123
1 Introduction......Page 125
2 Competing views of the monetary transmission mechanism......Page 126
2.1 The bank-lending channel......Page 128
2.2 The broad credit channel......Page 130
3.1 Evidence for the bank-lending channel......Page 131
3.2 Evidence for the broad credit channel......Page 132
4.1 The model......Page 135
4.2 Optimal monetary policy under different degrees of financial friction......Page 140
4.3 Policy when the impact of financial frictions is uncertain......Page 143
4.4 Robustness versus performance......Page 145
5 Concluding remarks......Page 147
Part 2 Firms’ investment and monetary policy: evidence from micro economic data......Page 149
1 Introduction......Page 151
2 Motivation of the analysis......Page 152
3 The theoretical framework......Page 156
4 Data set description......Page 159
5 Regression results......Page 163
6 The broad credit channel in the euro area......Page 168
7 User cost, cash flow, sales and monetary policy: a simulation exercise......Page 171
8 Conclusion......Page 178
1 Introduction......Page 180
2 Description of Belgian data......Page 181
3 Investment behaviour of Belgian firms......Page 184
4 Evaluating the interest rate channel of monetary policy on the capital stock......Page 187
5 Conclusion......Page 190
1 Introduction......Page 191
2 Corporate sector and financial structure in Germany......Page 192
3 Financial statements, creditworthiness data and user costs of capital......Page 194
4 Empirical results: the interest rate channel and the credit channel......Page 196
5 Evaluating the channels and conclusion......Page 202
1 Introduction......Page 205
2 Institutional and macroeconomic background......Page 207
3 Do some firms experience a tighter liquidity constraint?......Page 208
4 Monetary policy and investment......Page 213
5 Conclusion......Page 214
1 Introduction......Page 216
2 Firm-level data in Italy......Page 217
3 Baseline regression results......Page 220
4 Do some firms experience a tighter liquidity constraint?......Page 226
5 Monetary policy and investment......Page 227
6 Conclusions......Page 229
2 A brief account of some Luxembourg peculiarities......Page 230
3.1 Data......Page 231
3.2 Variable definitions......Page 232
4 Empirical results......Page 234
4.1 Regression (I): the benchmark regression......Page 235
4.3 Regression (III): the effect of monetary policy on the user cost......Page 237
5 Concluding remarks......Page 238
1 Introduction......Page 239
2 Investment financing and spending in Austria......Page 240
3 Database and indicators......Page 242
4 Baseline equation......Page 243
5 Role of trade credit and bank-lending relationships......Page 245
5.1 Trade credit......Page 248
5.2 Bank-lending relationships......Page 249
6 Summary and conclusions......Page 250
Part 3 The role of banks in the transmission: evidence from microeconomic data......Page 251
1 Introduction......Page 253
2.1 Characteristics of the banking system in the euro area......Page 259
2.2 Some conjectures on the role of banks in monetary policy transmission......Page 265
3 The model......Page 267
4 Evidence from BankScope data......Page 273
5 Evidence from Eurosystem data sets......Page 275
6 Conclusions......Page 282
A.1.2 Merger treatment......Page 283
A.1.4 Trimming of the sample/outlier elimination......Page 284
A.2.1 Loans......Page 285
A.3 Model specification and estimation methods......Page 286
1 Introduction......Page 288
2 Banks and bank loans in Germany......Page 289
4 Estimation specification......Page 293
5 Estimation results......Page 295
6 Summary and conclusions......Page 300
1 Introduction......Page 302
2 The Spanish banking system and its development during the 1990s......Page 303
3 The data......Page 305
4 The response of total loans to monetary policy changes......Page 309
5 Additional tests on the existence of the bank-lending channel......Page 310
6 Conclusions......Page 313
1 Introduction......Page 315
2 French banks: a brief presentation......Page 316
3.2 Econometric issues......Page 319
4.1 The impact of liquidity......Page 322
4.3 The impact of capitalisation......Page 324
5 Conclusion......Page 325
1 Introduction......Page 327
2 The structure of the Greek banking sector......Page 328
3 Theoretical framework and empirical evidence......Page 332
4 Conclusions......Page 339
1 Introduction......Page 341
2 The Italian banking sector......Page 342
3 The data......Page 345
4 The response of bank lending to a monetary shock......Page 347
5 The response of bank deposits and liquidity to a monetary shock......Page 349
6 Conclusions......Page 351
1 Introduction......Page 353
2 The Dutch credit market in the 1990s......Page 354
3 Structure of the Dutch banking sector......Page 356
4.1 The role of size, liquidity and capitalisation of banks......Page 359
4.2 The influence of market orientation......Page 362
5 Conclusion......Page 363
1 Introduction......Page 365
2.1 Structure of the banking sector......Page 366
2.2 Macroeconomic background and aggregate loan behaviour......Page 369
2.3 Data-cleaning/data-compilation......Page 370
3.1 Extending the bank-lending equation......Page 371
3.2 Results......Page 372
4 Conclusions......Page 375
2 Monetary policy and banking sector developments in Portugal during the 1990s......Page 377
3 Identifying the bank-lending channel: an alternative approach......Page 380
4 Empirical evidence using Portuguese micro bank data......Page 384
5 Conclusions......Page 389
1 Introduction......Page 390
2 Financial markets in Finland......Page 391
3 The data......Page 393
4 The effects of monetary policy on bank lending......Page 395
5 Summary and discussion......Page 398
Part 4 Monetary policy in the euro area: summary and discussion of the main findings......Page 399
1 Introduction......Page 401
2 Combining disparate pieces of evidence......Page 403
3 Monetary transmission to the aggregate euro area......Page 404
3.1 Stylised facts on the euro area business cycle......Page 405
3.3 Evidence from structural econometric models......Page 406
3.4 The exchange rate channel......Page 408
3.5 Overall summary of the euro aggregate evidence......Page 409
4 Macroeconomic evidence on monetary transmission in individual euro area countries......Page 410
4.1 The contribution of interest-sensitive spending to monetary policy-induced GDP movements......Page 411
5.1 Linking the policy rate to the determinants of investment......Page 414
5.2 Parsing the interest rate effects......Page 417
6 The role of banks in the transmission of monetary policy......Page 419
7.1 Austria......Page 423
7.4 France......Page 425
7.8 Italy......Page 426
7.12 Spain......Page 427
8 Conclusions......Page 428
1 Jürgen von Hagen......Page 431
2 Xavier Freixas......Page 435
3 Ben Bernanke......Page 439
4 Vítor Gaspar......Page 443
5 General discussion......Page 446
Appendix......Page 449
1 Introduction......Page 451
2.1 Output structure......Page 454
2.2 Financial structure......Page 455
3 National banking sectors in the euro area......Page 460
4 The non-financial enterprise sector......Page 461
5 The household sector......Page 464
Notes on the tables......Page 467
References......Page 473
Figures......Page 496
Tables......Page 499
Subject index......Page 504
Author index......Page 510
