Monetary policy transmission mechanism & bank lending channel in the euro area/ Greece case study
Greece Macro Monitor – Focus Notes
18 June 2013
This paper employs two discrete empirical methodologies to examine the existence of a banking lending channel in the euro area and to assess the functionality of the monetary policy transmission mechanism in Greece in the period before and after outbreak of the global financial crisis. In line with a number of earlier empirical studies, our results provide strong evidence supporting the existence of a banking lending channel in the euro area. Specifically, country-specific money demand shocks have a significant effect on the growth of loans, which effectively implies that the level of bank deposits is indeed a key determinant of loan supply...