Term Structure and the Sluggishness of Retail Bank Interest Rates in Euro Area Countries

By G. D. Bondt, Benoît Mojon, Natacha Valla. Social Science Research Network, 2005

160 citations recorded by the source corpus.

This paper analyses the pricing of bank loans and deposits in euro area countries. We show that retail bank interest rates adjust not only to changes in short term interest rates but also to long-term interest rates. This result, which is arguably intuitive for long-term retail bank rates, is also confirmed for bank interest rates on short-term instruments. The transmission of changes in short-term market interest rates along the yield curve is found to be a key factor explaining the sluggishness of retail bank interest rates. We also show that in the cases where we cannot reject that the adjustment of retail rates has changed since the introduction of the euro, this adjustment has become faster. JEL Classification: E43, G21

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3baf281954039589272ae648f0958c051b2a84d5

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

In Finance

Citations in the corpus

Are there asymmetries in the response of bank interest rates to monetary shocks? (2007, background): “E-mail: leonardo.gambacorta@bancaditalia.it 1 Among cross-country studies, see Cottarelli and Kourelis (1994), Borio and Fritz (1995) and de Bondt et al. (2005).”
The Transmission of Monetary Policy through Bank Lending: The Floating Rate Channel (2017, unknown): “Finally, while the pass-through of policy rates to floating interest rates of long-term debt is complete and occurs at frequent resetting dates, the pass-through to short-term bank financing rates has been shown to be slow (Bondt, Mojon, and Valla (2005), Illes and Lombardi (2013)).”