https://doi.org/10.52903/wp2024332
MONETARY POLICY TRANSMISSION: THE ROLE OF BANKING SECTOR CHARACTERISTICS IN THE EURO AREA
Georgios Mermelas
University of Patras and National Bank of Greece
Athanasios Tagkalakis
Bank of Greece and University of Patras
ABSTRACT
This study examines the impact of monetary policy shocks on the macroeconomic performance of 20 euro area countries. In doing so, it assesses how variations in the characteristics of the banking system affect the transmission of monetary policy. The main results show that a contractionary monetary policy shock reduces both inflation and retail sales while increasing the unemployment rate. In contrast, an expansionary monetary policy shock has positive but much milder effects on the economy. Βanking systems with higher profitability, risk exposure and lower assets-to-GDP cause a stronger effect of monetary policy on the economy. The main results hold when we consider alternative monetary policy shocks.
JEL-classifications: E58, E44, F45, G21, G15
Keywords: Monetary Policy, Euro Area, Banking Characteristics, Monetary Policy Transmission
Disclaimer: The article expresses the views of the authors and not those of the Bank of Greece and the National Bank of Greece. We remain solely responsible for any errors and omissions.
Correspondence:
Athanasios Tagkalakis
Bank of Greece
El.Venizelos 21, 10250 Athens, Greece
Tel.: +30-2103202442
atagkalakis@bankofgreece.gr