The transmission of interest rate changes and the role of bank balance sheets: a VAR analysis for the Netherlands

JH Garretsen, Job Swank

Research output: Contribution to journalArticleAcademicpeer-review

30 Citations (Scopus)

Abstract

We present evidence of monetary transmission in the Netherlands from a VAR-model estimated with monthly data covering the period 1979–1993. It is found that M2 and, to a lesser extent, bond holdings of banks outperform bank credit as leading indicators for monetary policy. Bond holdings are adjusted almost immediately in response to an interest rate shock. This, combined with the sluggish reaction of intermediated loans, may suggest that banks display buffer-stock behavior. The results for the real economy point to a fairly flat aggregate supply curve, implying that nominal price rigidities are important in the Dutch economy.
Original languageEnglish
Pages (from-to)325-339
Number of pages15
JournalJournal of Macroeconomics
Volume20
Publication statusPublished - 1998
Externally publishedYes

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