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Asymmetric bank lending channels and ECB monetary policy

Authors
Journal
Economic Modelling
0264-9993
Publisher
Elsevier
Publication Date
Volume
20
Issue
1
Identifiers
DOI: 10.1016/s0264-9993(01)00084-0
Keywords
  • European Central Bank
  • Asymmetry
  • Bank Lending Channel
  • Optimal Monetary Policy
Disciplines
  • Economics

Abstract

Abstract The launch of the euro has prompted interest in the differences between financial systems and their consequences for monetary policy transmission. This paper analyses the case of a monetary union composed of countries with heterogeneous bank lending channels. In order to insulate the economies from the asymmetric effects produced by differences in national banking systems, a money supply process based on the interest rate on bonds and its spread with respect to the lending rate is proposed. Using a two-country rational expectations model, this study highlights the properties of the optimal monetary instrument.

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