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Monetary policy transmission: the role of banking sector characteristics in the euro area

Author

Listed:
  • 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. Î’anking 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.

Suggested Citation

  • Georgios Mermelas & Athanasios Tagkalakis, 2024. "Monetary policy transmission: the role of banking sector characteristics in the euro area," Working Papers 332, Bank of Greece.
    • Handle: RePEc:bog:wpaper:332
    DOI: 10.52903/wp2024332
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    More about this item

    Keywords

    Monetary Policy; Euro Area; Banking Characteristics; Monetary Policy Transmission;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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