Monetary Transmission in Europe: The Role of Financial Markets and Credit

The formulation of a common European monetary policy offers an important challenge to policymakers both in Europe and around the globe. The analysis of monetary transmission mechanisms in Europe and the US, provides insights of great importance as the institutional environment of monetary policy changes. Historically, it has been proved difficult to empirically establish the effects of monetary policy measures on the economy. This study of the monetary transmission mechanisms pays close attention to the role of financial markets in the transmission process. The author analyzes aspects of monetary transmission, such as interest rates and exchange rates, with evidence from several European countries including the Netherlands, UK and Germany as well as from the US. This research on monetary transmission greatly increases our understanding of the effect, or ineffectiveness, of monetary policy on economies in general. The author presents a comprehensive discussion of the outcomes of empirical research along with an extensive survey of the literature and a discussion of the methods used, since interest in the subject was renewed in the 1980s. This work should be valuable to policymakers in central banks and government ministries as well as academic researchers and economists alike.