Banking Integration and Fragmentation in the Interest Rate Channel

Filippo Gori

No 05-2015, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: At the forefront of the economic consolidation of the euro area, banking integration came to a stall following the beginning of the 2008 crisis. Since then European banks started retrenching their asset holdings within national borders, effectively reducing the scale of their European operations. This paper explores the link between banking integration and fragmentation in the interest rate channel in the eurozone. Using a rolling VAR, I estimate the overtime evolution of the interest rate pass-through across European countries, and then I relate this evidence to banking integration dynamics. The results support the existence of a statistically significant and negative link between banking integration and cross-country differentials in the interest rate channel.

Keywords: Monetary policy; banking integration; financial fragmentation. (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 F36 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-03-05, Revised 2014-09-18
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp05-2015

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