Financial Structure and the Interest Rate Channel of ECB Monetary Policy

By Benoît Mojon. Social Science Research Network, 2000

410 citations recorded by the source corpus.

This paper analyses persistence differences in financial structure across countries of the euro area and whether they can lead to asymmetries in the transmission of the ECB policy. First, the paper examines the pass-through of money market rates to various bank retail rates and measures how this has evolved over the past two interest rate cycles. An analysis of panel data suggests that current 'country asymmetries' in the response of bank rates to monetary policy should decrease over time by virtue of the implementation of the single monetary policy, money market integration and the growth of debt securities markets and competition among banks. Second, analysis of the balance sheet structure of households and firms shows that the income effects of monetary policy are fairly homogenous in the four largest countries of the euro area, while wealth effects could be stronger in Italy. JEL Classification: E43, E52, G21

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/76b9b17e81d95fbf86aa02171b966d96f16ce93d

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Citations in the corpus

Market Power in European Banking Sectors (2005, neutral): “Studies such as Nathan and Neave (1989), Neave and Nathan (1991) and Shaffer (1993) have found an absence of market power even for the concentrated banking industry in Canada.”
Bank Interest Rate Pass-Through in the Euro Area: A Cross Country Comparison (2006, positive): “See also Cottarelli and Kourelis (1994) and Borio and Fritz (1995) for an international comparison as well as Heffernan (1997) and Hofmann and Mizen (2004) for the UK and Berlin and Meister (1999) for the US.”
Market Power in Mortgage Lending and the Transmission of Monetary Policy (2013, positive): “In addition, Scholnick (1996), Mojon (2000), Van Leuvensteijn, Kok Sørensen, Bikker and Van Rixtel (2013), find similar results on pass-through to both deposit and credit interest rates.”
Inflation Dynamics and the Cost Channel of Monetary Transmission 1 (2004, positive): “…funds are raised via marketable instruments (see Gale and Allen, 2000), should be more effective than, for example, in Germany, where the interest rate pass-through is known to be sluggish due to a less competitive banking sector (Mojon, 2000) and to tight relations to firms (see Kueppers, 2001).”
Convergence in Eurozone Retail Banking? What Interest Rate Pass-Through Tells Us About Monetary Policy Transmission, Competition and Integration (2003, positive): “First, regarding macro- economic determinants, it has long been advocated that money market rate volatility is a key determinant for bank interest rate margins (Saunders and Schumacher, 2000) and the pass-through (Cottarelli and Kourelis 1994, Mojon 2000, de Bondt, Mojon and Valla 2002).”
Monetary Policy Transparency and Pass-Through of Retail Interest Rates (2008, positive): “4 Mojon (2000) argues that aside from competition among banks, the degree of retail bank rate stickiness is also influenced by the monetary policy regime.”
Impact of bank competition on the interest rate pass-through in the euro area (2013, neutral): “Against this background, Mojon (2001) tests for the impact of banking competition on the transmission process”
Aggregate Loans to the Euro Area Private Sector (2003, neutral): “In particular, the composite lending rate tends to be steadier than market interest rates, reflecting the sluggish adjustment of retail lending interest rates to fluctuations in market interest rates (see Mojon (2000) and De Bondt (2002a)).”
Interest Rate Pass-Through: Empirical Results for the Euro Area (2005, neutral): “Mojon (2000) and Heinemann and Schüller (2002) also find short-term sluggishness in short-term bank lending rates to enterprises, but assume a priori a complete long-term pass-through.”
Bank Concentration and Retail Interest Rates (2002, neutral): “Similarly, Mojon (2000), using the same data set as this paper, finds a significant effect of deregulation on the interest rate pass through to deposits, but not to loans.”