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The monetary policy transmission mechanism and the role of money market funds in the Eurozone

Author

Listed:
  • Nicholas Apergis

    (University of Derby)

  • Tasawar Hayat

    (King Abdulaziz University)

  • Tareq Saeed

    (King Abdulaziz University)

Abstract

This paper investigates the pass-through mechanism of monetary policy through money market funds and bank loan rates under conventional and unconventional monetary policy. Using the Autoregressive Distributed Lag method, spanning the period 2003-2018, the findings document that the pass-through of bank loan rates is weaker than that of MMF rates (0.642 vs 1.044, respectively), especially during the unconventional monetary policy period (0.637 vs 1.568, respectively). They highlight that in this period, banks earned less from traditional lending business, due to low or even negative rates, while taking increasingly large risks.

Suggested Citation

  • Nicholas Apergis & Tasawar Hayat & Tareq Saeed, 2020. "The monetary policy transmission mechanism and the role of money market funds in the Eurozone," Economics Bulletin, AccessEcon, vol. 40(2), pages 1249-1260.
    • Handle: RePEc:ebl:ecbull:eb-19-01098
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    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I2-P106.pdf
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    More about this item

    Keywords

    conventional and unconventional monetary policy; money market funds; eurozone;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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