Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach

Kotz H-H, Semmler W, Tahri I (2018)
STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS 22(5, SI): 20170097.

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Zeitschriftenaufsatz | Veröffentlicht | Englisch
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Abstract / Bemerkung
This paper investigates the effect of financial fragmentation on the monetary transmission mechanism in different Euro area economies, categorized into two groups: countries considered as "core" economies and countries characterized as "peripheral" economies. We analyze the effects of financial fragmentation on the monetary transmission mechanism through the traditional interest rate channel. To gauge the impact of changes in policy rates on the behavior of real variables such as aggregate output and employment we use a Smooth Transition VAR (VSTAR) model. Employing a nonlinear multivariate time series approach helps us capture the regime-dependent dynamics of the variables under study. The results obtained show that money market rates targeted by the central bank do not completely pass through to banks' lending rates to firms, particularly in a financially fragmented environment. This finding supports the hypothesis of an impairment of the monetary transmission mechanism as a result of financial fragmentation. Given this impairment in some sectors and regions an accompanying credit volume policy might have been appropriate.
Erscheinungsjahr
Zeitschriftentitel
STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS
Band
22
Ausgabe
5, SI
Art.-Nr.
20170097
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Kotz H-H, Semmler W, Tahri I. Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS. 2018;22(5, SI): 20170097.
Kotz, H. - H., Semmler, W., & Tahri, I. (2018). Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 22(5, SI), 20170097. doi:10.1515/snde-2017-0097
Kotz, H. - H., Semmler, W., and Tahri, I. (2018). Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS 22:20170097.
Kotz, H.-H., Semmler, W., & Tahri, I., 2018. Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 22(5, SI): 20170097.
H.-H. Kotz, W. Semmler, and I. Tahri, “Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach”, STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, vol. 22, 2018, : 20170097.
Kotz, H.-H., Semmler, W., Tahri, I.: Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS. 22, : 20170097 (2018).
Kotz, Hans-Helmut, Semmler, Willi, and Tahri, Ibrahim. “Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach”. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS 22.5, SI (2018): 20170097.