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2004), “Bank networks and monetary policy transmission

By Michael Ehrmann, Andreas Worms and Deutsche Bundesbank


This paper argues that the existence of bank networks is important for banks ´ reaction to monetary policy. For the example of Germany, the VAR analysis shows that following a monetary contraction small banks access the interbank market indirectly through the head institutions of their respective network organisations. The interbank flows within these networks allow small banks to access funds that help them in keeping their loan portfolio with non-banks relatively unaffected. This implies that tests for a bank lending channel in countries with comparable bank networks should not rely on a size criterion only. JEL classification: C32, E52, G2

Topics: monetary policy
Year: 2011
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