Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All? / Ignazio Angeloni, Anil K. Kashyap, Benoit Mojon, Daniele Terlizzese.

Format:

Book

Author/Creator:

Angeloni, Ignazio.

Contributor:

Kashyap, Anil K.

Mojon, Benoit.

Terlizzese, Daniele.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9984.

NBER working paper series no. w9984

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Monetary Transmission in the Euro Area

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Drawing on recent Eurosystem research that uses a range of econometric techniques and a number of new data sets, we propose a comprehensive description of how monetary policy affects the euro area economy. We focus mainly on three questions: (1) what are the stylized facts concerning the transmission of monetary policy for the area as a whole and for individual countries? (2) can the classic' interest rate channel (IRC) alone, without capital market imperfections, explain these facts? (3) if not, is the bank lending channel a likely candidate to complete the story? We find plausible euro-area wide monetary policy responses for prices and output that are similar to those generally reported for the U.S. However, investment (relative to consumption) seems to play a larger role in euro area monetary policy transmission than in the U.S. We cannot reject the hypothesis that the IRC completely characterizes transmission in a few countries, and estimate it to be substantial in almost all. Where the IRC is not dominant, there is normally some direct evidence supporting the presence of a bank lending channel (or other financial transmission channel). The cases where financial effects appear important can be further split according to whether they primarily relate to consumption or investment.

Notes:

September 2003.

Print version record