Financial Structure Heterogeneity and the BankLending Channel of Monetary Policy: A Cross-Country Analysis

Using micro-data on syndicated loan contracts, this paper focuses on the impact of nancial structure heterogeneity on the Bank Lending Channel (BLC) of monetary policy transmission. Our theoretical model claims that, due to a larger reliance of the non-nancial private sector on bank nance vis-a-vis non-bank nance, a monetary policy shock should via the BLC have a larger impact on the pricing of loan contracts in bank-based versus market-based economies. We test this hypothesis empirically, and determine the impact of the Central Bank policy interest rate on the interest rate of syndicated loans in two economies with a large historical dierence in nancial structure: the U.S. and the Eurozone. Our results indicate that nancial structure heterogeneity does not result in a stronger Interest Rate Pass-Through (IRPT) in the Eurozone than in the U.S. via the BLC.