Are there asymmetries in the response of bank interest rates monetary shocks?

Leonardo Gambacorta and Simonetta Iannotti ()
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Simonetta Iannotti: Bank of Italy, Supervision and Regulation Department

No 566, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper examines the velocity and asymmetry in the response of bank interest rates to monetary policy shocks. Using an Asymmetric Vector Error Correction Model (AVECM), it analyses the pass-through of changes in the money market rates to retail bank interest rates in Italy in the period 1985-2002. The main results of the paper are: 1) the speed in adjustment of bank interest rates to monetary policy changes have significantly increased after the introduction of the 1993 Consolidated Law on Banking; 2) interest rate adjustment, in response to positive and negative shocks, are asymmetric in the short run, but not in the long run; 3) banks adjust their loan (deposit) rate at a faster rate during period of monetary tightening (easing); 4) this asymmetry has almost vanished since the nineties.

Keywords: monetary policy transmission; interest rates; asymmetries; liberalization (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-cba, nep-cfn, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Are there asymmetries in the response of bank interest rates to monetary shocks? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_566_05

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