Sovereign stress and heterogeneous monetary transmission to bank lending in the euro area

The Significance of Monetary Policy Transmission Mechanism in the Sustainable Development of the SAARC Economic Community

“…This study measured inflation by the CPI, but this study employed a GDP deflator as a proxy for inflation for Bangladesh because of the unavailability of CPI data for Bangladesh. The use of the different proxies for Bangladesh did not affect our results [30]. The variables included in this study are shown in Table 1.…”

Monetary policy models: lessons from the Eurozone crisis

“…Yet, considering the retained downward pattern in the leverage ratio during the previous expansive monetary policy periods, its exclusive capability to halt the deleveraging process remains ambiguous, justifying co-existence during the Pandemic Emergency Program of a broad range of measures such as those noted here. As Grandi (2019) pointed out, the abovesuggested structural financial policies aiming to complete the banking union would improve the homogeneity and effectiveness of the bank lending transmission channel and the efficiency of the monetary easing measures. In addition, the upward revision of the inflation objective agrees with all our theoretical and empirical findings, even expanding government purchases as a complementary remedy for economies subject to debt-deflation mechanisms (see, for instance, Ball, 2014;Blanchard et al, 2010;Murota and Ono, 2015).…”

“…Logically, the starting point must be a survey of empirical evidence on the objectives and instruments of the monetary policy relevant to the monetary transmission mechanisms. The analyses in this respect are numerous 4 , and, not surprisingly, a large body of studies focus on the ECB response to the crisis and the peculiarities of the monetary transmission mechanisms in the Eurozone (see, for instance, Angeloni et al, 2002;Drakos and Kouretas, 2015;ECB European Central Bank, 2010;Grandi, 2019;Weber et al, 2009). These studies reveal several salient features instrumental to our purpose: (i) They prove the existence of a continuous and stable inflation targeting by the ECB; (ii) they indicate the unresponsive credit growth for the sharp money supply increases and interest rate descents administered by the ECB; (iii) as several scholars conclude (see for instance, Fiedler and Gern, 2019;Giannone et al, 2019, and the references therein) this breakdown with respect to the established theoretical results is the consequence of significant changes in the monetary transmission mechanisms, or at least in the way they must be modeled; (iv) directly related to the above, the coexistence during the recent crisis of deflation, GDP contraction, and expansive monetary and fiscal policies for the Eurozone economy seems to respond to debt-deflation mechanisms, a crucial issue pointed out by several authors (see the monographs by Baimbridge and Whyman, 2015;Cardinale et al, 2017;Chang et al, 2019); (v) finally, these empirical studies show the increasing relevance of financial elements in the effectiveness of the monetary transmission mechanism and the vital role played by the bank lending channel.…”

The Augmented Bank Balance-Sheet Channel of Monetary Policy

“…A second avenue for further research is how to address the heterogeneous transmission of monetary policy in a currency union such as the euro area (Santis and Surico, 2013;Grandi, 2019). Our analysis exploits differences in the level of interest rates within a currency union.…”