Andrea Venegoni

Since its inception, EMU adequacy to be an Optimal Currency Area was questioned, and, along with it, the homogeneous transmission of the monetary impulses across the Eurozone. Adopting a Bayesian Time-Varying parameter FAVAR model that fixes the flaws present in the existing literature and exploits a sufficiently extended dataset, we provide an updated assessment of the transmission mechanism's functioning and of its symmetry along these first years of ECB operations. The empirical analysis shows that the occurrence of the two crises significantly altered the policy transmission, with the interest rate channel being the most affected. Policy-wise, our findings suggest that authorities must push towards a consistent innovation both on fiscal and monetary sides.

It is common practice in supervision of regulated banks to perform and disclose a simultaneous standardized assessment of their asset quality, organizational effectiveness, strategic viability and resilience to financial turmoil. Investigating the ECB 2014 Comprehensive Assessment and the subject banks' stock price reactions, we find that this process provides limited assistance to the market in sorting good banks from bad banks. Notwithstanding, the market adjusts to these findings, since it understands that they signal the stance of supervisory policy towards banking activities, which begets the level of regulatory risk and cost for the supervised banks.