Interbank rate uncertainty and bank lending

Carlo Altavilla, Giacomo Carboni, Michele Lenza and Harald Uhlig ()

No 2311, Working Paper Series from European Central Bank

Abstract: This paper investigates the effects of interbank rate uncertainty on lending rates to euro area firms. We introduce a novel measure of interbank rate uncertainty, computed as the cross-sectional dispersion in interbank market rates on overnight unsecured loans. Using proprietary bank-level data, we find that interbank rate uncertainty significantly raises lending rates on loans to firms, with a peak effect of around 100 basis points during the 2007-2009 global financial crisis and the 2010-2012 European sovereign crisis. This effect is attenuated for banks with lower credit risk, sounder capital positions and greater access to central bank funding. JEL Classification: E44, D80, G21

Keywords: bank lending; interbank market; uncertainty (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
Note: 2279334
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20192311

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