We interpret this as evidence of an “atypical interim period” characterised by “fluctuations” or “perturbations” lasting from 1996 to the end of 1998. During this period, the monetary transmission process in the euro area differed significantly from the periods before and afterwards.
However, this result does not necessarily mean that financial development left monetary transmission unchanged: Financial development may have had offsetting effects on different transmission channels, e.g. speeding up the interest rate channel, lessening the importance of the bank lending channel and boosting the role of the balance sheet channel.