Economics, Econometrics and Finance
4 years ago

Monetary policy tightening in euro area leads to larger economic impact.

RePEc: Research Papers in Economics
Modelling bank lending in the euro area: A non-linear approach
Leonardo Gambacorta, Carlotta Rossi

Paper Summary

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The study looked at how bank lending in the euro area responds to changes in monetary policy. They used a special model to analyze data from 1985 to 2005, focusing on factors like loans, GDP, interest rates, and prices. The model showed that when monetary policy gets tighter, it has a bigger impact on credit, GDP, and prices compared to when it gets looser. This suggests that there is a one-sided effect on the economy when monetary policy changes in the euro area.