Working Paper: CEPR ID: DP8944
Authors: Domenico Giannone; Michele Lenza; Lucrezia Reichlin
Abstract: This paper uses a data-set including time series data on macroeconomic variables, loans, deposits and interest rates for the euro area in order to study the features of financial intermediation over the business cycle. We find that stylized facts for aggregate monetary and real variables are remarkably similar to what has been found for the US by many studies while we uncover new facts on disaggregated loans and deposits. During the crisis the cyclical behavior of short term interest rates, loans and deposits remain stable but we identify unusual dynamics of longer term loans, deposits and longer term interest rates.
Keywords: Euro Area; Loans; Monetary Policy; Money; Nonfinancial Corporations
JEL Codes: C32; C51; E32; E51; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Systematic monetary policy (E52) | Positive correlation with business cycle (E32) |
| Unexpected monetary policy shocks (E39) | Negative correlation with business cycle (E32) |
| Business cycle shocks (E32) | Short-term interest rates (E43) |
| Monetary policy shocks (E39) | Short-term interest rates (E43) |
| Economic contractions (E32) | Loans to non-financial corporations (G29) |
| Crisis (H12) | Behavior of long-term deposits and household loans (G51) |
| Crisis (H12) | Sensitivity of deposits to changes in yield curve (E43) |
| ECB's unconventional liquidity policies (E52) | Cyclical behavior of short-term loans (E32) |