An empirical analysis of national differences in the retail bank interest rates of the euro area

Massimiliano Affinito and Fabio Farabullini ()
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Fabio Farabullini: Banca d'Italia

No 589, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The availability of new harmonized data on bank interest rates allows a rigorous assessment to be made of cross-country price homogeneity/heterogeneity in euro area retail credit markets. Econometric analysis shows that the banking market is still highly segmented and that the degree of integration in a single country (Italy, taken as a benchmark for integration) is greater than in the euro area. However, national differences can be partially explained by variables reflecting the characteristics of domestic depositors and borrowers (�demand side� regressors, such as risk exposure, disposable income, alternative financing sources, average firm size) and the characteristics of the banking systems (�supply side� regressors, such as banking market concentration, asset and liability structure). The euro area prices appear different because national banking products appear different or because they are differentiated by national factors. Once these factors have been controlled for, many differences disappear.

Keywords: bank interest rates; convergence; integration (search for similar items in EconPapers)
JEL-codes: E43 E44 G21 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-ban, nep-eec, nep-fin, nep-fmk, nep-mac and nep-mon
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_589_06

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