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1、Working PaPer SerieSno 1233 / auguSt 2010Bank heterogeneity and monetary Policy tranSmiSSionby Sophocles N. Brissimis and Manthos D. DelisWORKING PAPER SERIESNO 1233 / AUGUST 2010In 2010 all ECB publications feature a motif taken from the 500 banknote.BANK HETEROGENEITY AND MONETARY POLICY TRANSMISS
2、ION1by Sophocles N. Brissimis 2 and Manthos D. Delis 31 Acknowledgements: For helpful comments and suggestions, the authors are grateful to Efthymios Tsionas, Heather Gibson, participants of the European Central Bank workshop entitled “Monetary policy transmission mechanism in the euro area in its f
3、irst 10 years” (held in Frankfurt on 28-29 September, 2009) and the Editorial Board of the ECB Working Paper Series. 2 Corresponding author: Bank of Greece, Economic Research Department, 21 E. Venizelos Avenue, Athens 10250, Greece and Department of Economics, University of Piraeus, 80 Karaoli and D
4、imitriou Street, Piraeus 18534, Greece; e-mail: sbrissimisbankofgreece.gr 3 University of Ioannina, Department of Economics, Ioannina 45110, Greece; e-mail: delisaueb.grThis paper can be downloaded without charge from http:/www.ecb.europa.eu or from the Social Science Research Network electronic lib
5、rary at http:/ This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. European Central Bank, 2010Address Kaiserstrasse 29 60311 Frankfurt am Main, GermanyPos
6、tal address Postfach 16 03 19 60066 Frankfurt am Main, GermanyTelephone +49 69 1344 0Internet http:/www.ecb.europa.euFax +49 69 1344 6000 All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in
7、part, is permitted only with the explicit written authorisation of the ECB or the authors. Information on all of the papers published in the ECB Working Paper Series can be found on the ECBs website, http:/www. ecb.europa.eu/pub/scientific/wps/date/ html/index.en.htmlISSN 1725-2806 (online)3ECB Work
8、ing Paper Series No 1233 August 2010Abstract 4Non-technical summary 51 Introduction 72 Theoretical considerations 10 2.1 Channels of monetary policy transmission through banks 11 2.2 Distributional effects of monetary policy 133 Methodology for estimating the effects of heterogeneity 17 3.1 The empi
9、rical model 17 3.2 Data and variables 204 Empirical results 26 4.1 Practical issues in the estimation procedure and general results 26 4.2 Monetary policy and lending 29 4.3 Monetary policy and risk 314.4 Monetary policy and profitability 325 Discussion and concluding remarks 34References 36Tables a
10、nd figures 41CONTENTSAbstract Heterogeneity in the response of banks to a change in monetary policy is an important element in the transmission of this policy through banks. This paper examines the role of bank liquidity, capitalization and market power as internal factors influencing banks reaction
11、 in terms of lending and risk-taking to monetary policy impulses. The ultimate impact of a monetary policy change on bank performance is also considered. The empirical analysis, using large panel datasets for the United States and the euro area, elucidates the sources of differences in the response
12、of banks to changes in policy interest rates by disaggregating down to the individual bank level. This is achieved by the use of a Local GMM technique that also enables us to quantify the degree of heterogeneity in the transmission mechanism. It is argued that the extensive heterogeneity in banks re
13、sponse identifies overlooked consequences of bank behavior and highlights potential monetary sources of the current financial distress. JEL classification: E44; E52; G21; C14 Keywords: Monetary policy; Bank heterogeneity; Risk-taking; Bank performance 4ECB Working Paper Series No 1233 August 20105EC
14、B Working Paper Series No 1233 August 2010This paper analyzes empirically the heterogeneous response of US and euro area banks over the period 1994-2007 in terms of their lending and risk-taking decisions following a monetary policy change. The ultimate impact of a monetary policy change on bank per
15、formance is also considered. In our empirical strategy, the heterogeneous effects of monetary policy stem from a number of bank characteristics, namely liquidity, capitalization and market power. More specifically, using a method that identifies parameter heterogeneity at the bank level, this paper
16、aims to (i) add to the limited literature that considers the effect of monetary policy on bank risk-taking and profitability and, more importantly, (ii) analyze and quantify the heterogeneous response of banks following a change in monetary policy. To carry out these tasks we resort to a local generalized method of moments (LGMM) technique. This technique considers the estimation of a dynamic panel data mo
