Retail Bank Interest Rate Pass-Through: New Evidence at the Euro Area Level
By G. D. Bondt. Social Science Research Network, 2002
121 citations recorded by the source corpus.
This paper presents an error-correction model of the interest rate pass-through process based on a marginal cost pricing framework including switching and asymmetric information costs. Estimation results for the euro area suggest that the proportion of the pass-through of changes in market interest rates to bank deposit and lending rates within one month is at its highest around 50%. The interest rate pass-through is higher in the long term and notably for bank lending rates close to 100%. Moreover, a cointegration relation exists between retail bank and comparable market interest rates. Robustness checks, consisting of impulse responses based on VAR models and results for a sub-sample starting in January 1999, show qualitatively similar findings. However, the sub-sample results are supportive of a quicker pass-through process since the introduction of the euro. JEL Classification: E43, G21
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/259a9ac21eee61c758c0fdf1bf0cdc107d4b5bd9
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Annalisa Ferrando
- Peter Hördahl
- E. Krylova
- Cyril Monnet
- Christoffer Kok
- Jung-Duk Lichtenberger
- Lieven Baele
- C. K. Sørensen
In Finance
- Christoffer Kok
- Michiel van Leuvensteijn
- Jung-Duk Lichtenberger
- J. Bikker
- Reint Gropp
- Annalisa Ferrando
- Peter Hördahl
- E. Krylova
Citations in the corpus
- Impact of bank competition on the interest rate pass-through in the euro area (2013, background): “23 See also Mojon (2001), De Bondt (2005) and Kok Sørensen and Werner (2006). 24 When tested, one single EU-wide parameter for market int rest rates was rejected in favour of separate country-specific parameters for market interest rates.”
- Measuring financial integration in the euro area (2004, background): “Other studies have shown that, typically, the pass-through is incomplete, and its speed of adjustment is much slower for short-term loans than for long-term rates (see De Bondt, 2002a for euro area results and De Bondt et al (2002b) for country-level results).”
- The Dynamics of Bank Spreads and Financial Structure (2014, background): “However, a common drawback of these measures is that they are backward-looking (reflecting realised defaults) rather than forward-looking proxies of credit risk (Brock and Franken, 2003). Second, we also considered the rate of unemployment, although like Berlin and Mester (1999), we have some concer”
- Monetary Policy Transparency and Pass-Through of Retail Interest Rates (2008, unknown): “The pass-through and adjustment speed also differ across financial institutions and across financial products, implying the speed of monetary transmission may vary across different segments of the banking sector (see Cottarelli and Kourelis, 1994; Mojon, 2000; Bondt, 2002; Hofmann and Mizen, 2004).”