How Do Anticipated Changes to Short-Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies

Abstract-How well does the theory of the firm explain the choice between intrafirm and arm's-length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property rights theories of the multinational firm. Intrafirm imports are more likely in capital-and skill-intensive firms, in highly productive firms, and from countries with well-functioning judicial institutions. We bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin and uncover interesting patterns in the data that require further theoretical investigation.

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Reserve Requirements for Price and Financial Stability - When are They Effective?

Glocker

Towbin

2012

SSRN Journal

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Reserve requirements are a prominent policy instrument in many emerging countries. The present study investigates the circumstances under which reserve requirements are an appropriate policy tool for price or financial stability. We consider a small open-economy model with sticky prices, financial frictions, and a banking sector that is subject to legal reserve requirements and compute optimal interest rate and reserve requirement rules. Overall, our results indicate that reserve requirements can support the price stability objective only if financial frictions are important and lead to substantial improvements if there is a financial stability objective. Contrary to a conventional interest rate policy, reserve requirements become more effective when there is foreign currency debt.JEL Codes: E580, E520, F410, G18.

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How Do Anticipated Changes to Short-Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies

Abstract: The authors gratefully acknowledge financial support from the British Academy through SG-47026 and the EU Commission through MRTN-CT-2006-034270-COMISEF. An early version of this paper was discussed at an 'expert meeting' at the European Central Bank, Frankfurt.

Cited by 21 publications

References 54 publications