The University of Southampton
University of Southampton Institutional Repository

Changes in the transmission of monetary policy during crisis episodes: evidence from the Euro area and the U.S.

Changes in the transmission of monetary policy during crisis episodes: evidence from the Euro area and the U.S.
Changes in the transmission of monetary policy during crisis episodes: evidence from the Euro area and the U.S.
This paper proposes a bank-based theoretical model for the credit market that accommodates different types of creditors. The equilibrium relationships between monetary aggregates, credit interest rates and real income are derived from banks' optimizing behavior. This model is used to theoretically establish the effects of a crisis on the bank lending channel and, more specifically, on the equilibrium relationships between the main economic and monetary variables. The model is also used to explore the potential effects of unconventional monetary policies focused on reducing risk aversion during crisis episodes. These effects are empirically assessed applying cointegration techniques to macroeconomic data of the euro area and the United States before and after the collapse of the Lehman Brothers. The results support the efficacy of unconventional measures in restoring the conventional transmission channels between monetary aggregates but shed some doubts on the ability of these measures to boost economic activity.
0264-9993
155-166
Olmo, J.
706f68c8-f991-4959-8245-6657a591056e
Sanso-Navarro, M.
4372b89e-ef4a-4183-9429-eaefd382d870
Olmo, J.
706f68c8-f991-4959-8245-6657a591056e
Sanso-Navarro, M.
4372b89e-ef4a-4183-9429-eaefd382d870

Olmo, J. and Sanso-Navarro, M. (2015) Changes in the transmission of monetary policy during crisis episodes: evidence from the Euro area and the U.S. [in special issue: Current Challenges on Macroeconomic Analysis and International Finance Modelling] Economic Modelling, 48, 155-166. (doi:10.1016/j.econmod.2014.10.033).

Record type: Article

Abstract

This paper proposes a bank-based theoretical model for the credit market that accommodates different types of creditors. The equilibrium relationships between monetary aggregates, credit interest rates and real income are derived from banks' optimizing behavior. This model is used to theoretically establish the effects of a crisis on the bank lending channel and, more specifically, on the equilibrium relationships between the main economic and monetary variables. The model is also used to explore the potential effects of unconventional monetary policies focused on reducing risk aversion during crisis episodes. These effects are empirically assessed applying cointegration techniques to macroeconomic data of the euro area and the United States before and after the collapse of the Lehman Brothers. The results support the efficacy of unconventional measures in restoring the conventional transmission channels between monetary aggregates but shed some doubts on the ability of these measures to boost economic activity.

Text
OlmoSanso_EcMod_final.pdf - Accepted Manuscript
Download (238kB)

More information

Accepted/In Press date: 17 October 2014
e-pub ahead of print date: 8 November 2014
Published date: August 2015
Organisations: Economics

Identifiers

Local EPrints ID: 376504
URI: http://eprints.soton.ac.uk/id/eprint/376504
ISSN: 0264-9993
PURE UUID: af6e51cd-219a-473d-8758-8854525096a0
ORCID for J. Olmo: ORCID iD orcid.org/0000-0002-0437-7812

Catalogue record

Date deposited: 30 Apr 2015 10:03
Last modified: 15 Mar 2024 03:46

Export record

Altmetrics

Contributors

Author: J. Olmo ORCID iD
Author: M. Sanso-Navarro

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×