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One size may not fit all: Financial fragmentation and European monetary policies

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  • Marie‐hélène Gagnon

    (ULaval - Université Laval [Québec], CRREP - Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques - ULaval - Université Laval [Québec])

  • Céline Gimet

    (Institut d'Études Politiques [IEP] - Aix-en-Provence, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article investigates the impact of European Central Bank policies on credits considering financial and banking fragmentation. Using European data from the past decade, we estimate SVAR models to analyze the regional impact of conventional and unconventional measures on price and volume indicators of fragmentation. The risk-taking channel is studied using GVAR models to document the national consequences of this fragmentation. We find that unconventional measures increase credit in peripheral countries. Monetary policies alleviate fragmentation, but mostly in terms of price dispersion rather than credit volume. Finally, unconventional measures imply a rebalancing of European bank assets in favor of foreign currency denominated-assets.

Suggested Citation

  • Marie‐hélène Gagnon & Céline Gimet, 2023. "One size may not fit all: Financial fragmentation and European monetary policies," Post-Print hal-03777950, HAL.
    • Handle: RePEc:hal:journl:hal-03777950
    DOI: 10.1111/roie.12627
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03777950
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    Keywords

    banking fragmentation; financial fragmentation; monetary policy; risk-taking channel;
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