Working Paper: CEPR ID: DP2016
Authors: Giorgia Giovannetti; Ramon Marimon
Abstract: We develop and compute a dynamic equilibrium model where economies differ on the relative efficiency of financial intermediaries and, therefore on households portfolios and currency holdings. Our model economies have some of the features of the different financial structures in countries of the European Union and respond to monetary shocks in a way similar to the observed responses, which we also estimate. It follows that if differences on the relative efficiency of financial intermediaries persist in a monetary union, conflicts of interests in the pursuit of a common monetary policy can arise.
Keywords: transmission mechanisms; ECB; monetary policy; limited participation
JEL Codes: E44; E52; F30; F33; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Differences in efficiency of banking sectors (G21) | Distinct portfolio choices and financing mixes for firms (G32) |
| More efficient banking sector (Germany) (G21) | Higher reliance on bank financing (G21) |
| Less efficient banking sector (France) (G21) | Greater dependence on equity markets (G19) |
| Monetary shocks (E39) | Different magnitude and timing effects on output and prices (E39) |
| Less efficient banking systems (F65) | Greater negative impacts from monetary contractions (E49) |