We use an original monthly dataset of 131 individual euro area banks to examine the effectiveness and transmission mechanism of the Eurosystem's credit support policies since the start of the crisis. First, we show that these policies have indeed been successful in stimulating the credit flow of...

This paper surveys recent advances in the monetary transmission mechanism (MTM). In particular, while laying out the functioning of the separate channels in the MTM, special attention is paid to exploring possible interrelations between different channels through which they may amplify or...

Proponents of the so-called New Economy claim that it entails a structural change of the economy. Such a change, in turn, would require the central bank to rethink its monetary policy to the extent that traditional relationships between inf1ation and economic growth are no longer valid. But such...

We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

Major differences between national financial systems might make a common monetary policy difficult. As within Europe, Germany and the United Kingdom differ most with respect to their financial systems, the present paper addresses its topic under the assumption that the United Kingdom is already...

This paper sheds light on the effect of quantitative easing (QE) on bank lending. Using data on German banks for 2014-2016, I show that QE encourages banks to rebalance from securities to loans. For identification, I use bond redemptions as exogenous variation in banks' need to rebalance their...

The Eurosystem's Public Sector Purchase Programme (PSPP) increased the scarcity of safe assets, which caused significant declines and substantial dispersion in European repo rates. However, banks holding these safe assets benefited from this development: First, using the German security...

We evaluate the ECB’s monetary policy strategy against the underlying economic structure of the euro area economy, in normal times and in times of severe financial dislocations. We show that in the years preceding the financial crisis that started in 2007 the strategy was successful at...

This article examines the misconceptions about modern money theory (MMT) put forward by . The author divides her critique into three categories. First, the Drumetz/Pfister article erroneously indicates that MMT focuses exclusively on the means-of-payment function of money, that it considers...

This study analyses the policy measures taken in the euro area in response to the outbreak and the escalating diffusion of new coronavirus (COVID-19) pandemic. We focus on monetary, microprudential and macroprudential policies designed specifically to support bank lending conditions. For...