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A crucial condition for the existence of a credit channel through bank loans is that monetary policy should be able to change bank loan supply. This paper contributes to the discussion on this issue by presenting empirical evidence from dynamic panel estimations based on a dataset that comprises individual balance-sheet information on all German banks. It shows that the average bank reduces its lending more sharply in reaction to a restrictive monetary policy measure, the lower its ratio of short-term interbank deposits to total assets is. This result is robust against a broad variety of changes in the specification. A dependence on its size can be found only if explicitly controlled for this dominating effect and/or if the very small banks are excluded. Overall, the evidence is compatible with the existence of a credit channel, although it is weakened by the banks´ liquidity management.

A crucial condition for the existence of a credit channel through bank loans is that monetary policy should be able to change bank loan supply. This paper contributes to the discussion on this issue by presenting empirical evidence from dynamic panel estimations based on a dataset that comprises individual balance-sheet information on all German banks. It shows that the average bank reduces its lending more sharply in reaction to a restrictive monetary policy measure, the lower its ratio of short-term interbank deposits to total assets is. This result is robust against a broad variety of changes in the specification. A dependence on its size can be found only if explicitly controlled for this dominating effect and/or if the very small banks are excluded. Overall, the evidence is compatible with the existence of a credit channel, although it is weakened by the banks' liquidity management. ; Eine wesentliche Bedingung für die Existenz eines durch Bankkredite wirkenden Kreditkanals ist, dass geldpolitische Maßnahmen das Bankkreditangebot verändern. Dieses Papier trägt zur Diskussion über diese Fragestellung bei, in dem es empirische Evidenz aus dynamischen Panelschätzungen präsentiert, die auf Bilanzdaten aller deutschen Banken basieren. Das Papier zeigt, dass die durchschnittliche Bank ihre Kreditvergabe in Reaktion auf eine restriktive geldpolitische Maßnahme um so stärker reduziert, je geringer der Anteil der von ihr gehaltenen kurzfristigen Interbankdepositen an ihrer Aktivsumme ist. Dieses Resultat ist robust hinsichtlich einer Vielzahl von Änderungen in der Schätzspezifikation. Eine Abhängigkeit der Reaktion von der Größe einer Bank kann nur dann festgestellt werden, wenn dieser dominierende Einfluß der kurzfristigen Interbankdepositen explizit berücksichtigt wird und/oder wenn die kleinen Banken von der Untersuchung ausgeschlossen werden. Alles in allem ist diese Evidenz kompatibel mit der Existenz eine Kreditkanals, obwohl dieser durch das Liquiditätsmanagement der Banken geschwächt wird.

Credit risk associated with interbank lending may lead to domino effects, where the failure of one bank results in the failure of other banks not directly affected by the initial shock. Recent work in economic theory shows that this risk of contagion depends on the precise pattern of interbank linkages. We use balance sheet information to estimate the matrix of bilateral credit relationships for the German banking system and test whether the breakdown of a single bank can lead to contagion. We find that the financial safety net (institutional guarantees for saving banks and cooperative banks) considerably reduces- but does not eliminate - the danger of contagion. Even so, the failure of a single bank could lead to the breakdown of up to 15 % of the banking system in terms of assets.

This paper presents empirical evidence on the behaviour of interbank lending in Germany after a monetary policy impulse. Our VAR analysis shows that following a monetary contraction, the banking system as a whole attracts additional funds from foreign banks. Whereas small cooperative and savings banks do not seem to directly access the interbank market themselves, they do so indirectly through the head institutions of their sectors, i.e. the savings banks and credit cooperative sector, respectively. The interbank flows within these two sectors allow small banks to access funds that might help them in keeping their loan portfolio relatively unaffected. This may explain why the evidence for a bank lending channel in Germany seems to be weaker compared to other countries, e.g. the US.

This paper presents empirical evidence on the behaviour of interbank lending in Germany after a monetary policy impulse. Our VAR analysis shows that following a monetary contraction, the banking system as a whole attracts additional funds from foreign banks. Whereas small cooperative and savings banks do not seem to directly access the interbank market themselves, they do so indirectly through the head institutions of their sectors, i.e. the savings banks and credit cooperative sector, respectively. The interbank flows within these two sectors allow small banks to access funds that might help them in keeping their loan portfolio relatively unaffected. This may explain why the evidence for a bank lending channel in Germany seems to be weaker compared to other countries, e.g. the US. ; Dieses Papier präsentiert empirische Evidenz zum Verhalten der Interbankkredite in Deutschland nach einem geldpolitischen Impuls. Unsere VAR-Analyse zeigt, dass das Bankensystem als Ganzes nach einer geldpolitischen Kontraktion zusätzliche Mittel von Banken aus dem Ausland aufnimmt. Während kleine Kreditgenossenschaften und Sparkassen nicht direkt auf den Interbankenmarkt zugreifen, tun sie dies indirekt durch die übergeordneten Institute ihres jeweiligen Girosystems, d.h. des Genossenschafts- bzw. Sparkassensektors. Die Interbankströme innerhalb dieser beiden Sektoren erlauben es auf diese Weise kleinen Banken an Mittel zu gelangen, mit deren Hilfe sie die Wirkungen geldpolitischer Maßnahmen auf ihr Kreditportefeuille abfedern können. Dies könnte auch erklären, warum die Evidenz für einen Bankkreditkanal in Deutschland schwächer zu sein scheint als in anderen Ländern, beispielsweise den USA.

For some time now the buzzword 'transparency' has been bandied about in the media almost daily. For example, calls were made for greater transparency in the financial system in connection with developments in the Asian financial markets. But the call for greater transparency goes far beyond the financial markets. It is now regarded as a necessary part of "good governance" demanded of all economic policy makers. As the World Bank's chief economist Joseph Stiglitz put it: 'No one would dare say that they were against transparency (.): It would be like saying you were against motherhood or apple pie.' This paper focuses on transparency in monetary policy, in particular with respect to the European System of Central Bank.

The paper derives the monetary policy reaction function implied by money growth targeting. It consists of an interest rate response to deviations of the inflation rate from target, to the change in the output gap, to money demand shocks and to the lagged interest rate. In the second part, it is shown that this type of inertial interest rate rule characterises the Bundesbank's monetary policy from 1979 to 1998 quite well. This result is robust to the use of real-time or ex post data and to the consideration of serially correlated errors. The main lesson is that, in addition to anchoring long-term inflation expectations, monetary targeting introduces inertia and history-dependence into the monetary policy rule. This is advantageous when private agents have forward-looking expectations and when the level of the output gap is subject to persistent measurement errors.

Papers estimating the reaction function of the Bundesbank generally find that its monetary policy from the 1970s to 1998 can well be captured by a standard Taylor rule according to which the central bank responds to the output gap and to deviations of inflation from target, but not to monetary growth. This result is at odds with the Bundesbank's claim that it followed a strategy of monetary targeting. This paper analyses whether this apparent contradiction is due to (a) the use of ex post data which do not necessarily match policy makers? real-time information sets and (b) the omission of important explanatory variables. Accordingly, we compile a real-time data set for Germany including the Bundesbank?s own estimates of potential output and use it to reestimate the Bundesbank?s reaction function. We find that the use of real-time data considerably changes the results. Moreover, when adding the change in the output gap as well as deviations of money growth from target to the set of explanatory variables, we find that both variables are highly significant. This suggests that the Bundesbank took its monetary targets seriously, but also responded to deviations of expected inflation and output growth from target.