The objective of this paper is to determine whether ERM-participating countries have experienced a change in the effectiveness of monetary and fiscal policies since the establishment of the ERM. Countries which have come to rely more heavily on fiscal policy instruments as the means of output,...

We provide some evidence consistent with a heterogeneous credit channel of monetary policy transmission in the European Union. Using the techniques of cointegration and Error Correction Models, we have shown that the external finance premium is one important leading indicator of real economic...