The monetary transmission mechanism in France: effects of the policy interest rate on bank interest rates and credit conditions

This paper analyses the monetary transmission mechanism for France over the period 1999-2012 through two of its main channels: the interest rate channel and the bank lending channel. It also focuses on the impact of the recent financial crisis on the pass-through to interest rates and credit volumes. The effect of a change in the interest rates set by the European Central bank is positive and significant for money market rates, government debt rates and lending rates to non-financial corporations, implying that the interest rate channel is quite strong in France, especially in the short-term (the effect is weaker for rates with a maturity over 2 years); the pass-through to credit volumes seems to be non-significant.