Interest rate linkages within the EMS and bank credit supply
研究欧洲货币体系内德国货币政策如何通过利率联动影响其他成员国的银行信贷行为，并解释欧洲银行业改革和成员国政策脱钩的信贷供给原因。
Abstract The exchange rates between the currencies of European Monetary System (EMS) members are essentially fixed between narrow bands mandated by the Exchange Rate Mechanism (ERM). the intent of such a fixed rate regime is to enhance policy co‐ordination within the EMS. However, it has instead led to German policy dominance within the system according to several recent studies. We examine the optimal dynamic credit policy of a bank in an EMS country that is subject to such German ‘dominance’. Our stochastic control model reveals conditions under which German monetary policies can influence domestic bank lending behaviour. It also suggests that banks may be able to hedge such risk exposure by increasing in size. the model offers ‘credit supply' based explanations for recent regulatory reforms in Europe towards unified banking and the attempts of several EMS members to de‐link their policies from that of the German Bundesbank.