TY - JOUR AU - Angeloni,Ignazio AU - Kashyap,Anil K. AU - Mojon,Benoit AU - Terlizzese,Daniele TI - Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All? JF - National Bureau of Economic Research Working Paper Series VL - No. 9984 PY - 2003 Y2 - September 2003 UR - http://www.nber.org/papers/w9984 L1 - http://www.nber.org/papers/w9984.pdf N1 - Author contact info: Ignazio Angeloni European Central Bank Postfach 16 03 19 D-60066 Frankfurt am Main GERMANY E-Mail: ignazio.angeloni@ecb.int Anil Kashyap Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7260 Fax: 773/702-0458 E-Mail: anil.kashyap@chicagobooth.edu Benoît Mojon Banque de France 1 rue de la Vrilliere 75001 Paris E-Mail: benoit.mojon@banque-france.fr Daniele Terlizzese Banca d'Italia Via Nazionale 91 Roma 00136 ITALY E-Mail: Daniele.Terlizzese@bancaditalia.it M1 - published as Athanasios Orphanides, John Williams. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," in Ben S. Bernanke and Michael Woodford, editors, "The Inflation-Targeting Debate" University of Chicago Press (2005) AB - Drawing on recent Eurosystem research that uses a range of econometric techniques and a number of new data sets, we propose a comprehensive description of how monetary policy affects the euro area economy. We focus mainly on three questions: (1) what are the stylized facts concerning the transmission of monetary policy for the area as a whole and for individual countries? (2) can the classic' interest rate channel (IRC) alone, without capital market imperfections, explain these facts? (3) if not, is the bank lending channel a likely candidate to complete the story? We find plausible euro-area wide monetary policy responses for prices and output that are similar to those generally reported for the U.S. However, investment (relative to consumption) seems to play a larger role in euro area monetary policy transmission than in the U.S. We cannot reject the hypothesis that the IRC completely characterizes transmission in a few countries, and estimate it to be substantial in almost all. Where the IRC is not dominant, there is normally some direct evidence supporting the presence of a bank lending channel (or other financial transmission channel). The cases where financial effects appear important can be further split according to whether they primarily relate to consumption or investment. ER -