The interest rate banks charge each other for overnight loans eased closer to a record low as May wrapped up on Friday, but the move is unlikely to prompt U.S. Federal Reserve action unless it stays at the lower level.
Abstract
Using business survey data on German manufacturing firms, this paper provides tests for hypotheses formulated in capital market imperfection theories that predict distributional effects in the transmission mechanism of monetary policy. Effects of monetary policy shocks on the business conditions of firms of several size classes are analysed, with the finding of considerable asymmetry. As predicted by theory, small firms are affected more strongly than large firms. To test whether these effects are reinforced when the economy is in a business cycle downturn, the paper employs a new estimation strategy: impulse response analysis conditional on Markov-switching regimes. The findings are supportive of the theoretical hypotheses: in a business cycle downturn, the distributional effects of monetary policy transmission are indeed reinforced.
China's central bank said on Monday that it will raise the FX reserve requirement ratio for financial institutions to 7% from 5%, effective on June 15.
Indonesia's central bank left its benchmark policy rate at a record low on Tuesday, seeking to maintain support for Southeast Asia's biggest economy while ensuring stability in financial markets amid the risk of outflows.