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Estimating the monetary policy interest-rate-to-performance sensitivity of the European banking sector at the zero lower bound

Bernd Hayo, Kai Henseler and Marc Steffen Rapp ()
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Kai Henseler: Philipps-Universitaet Marburg
Marc Steffen Rapp: Philipps-Universitaet Marburg

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: Using an event-study design, we investigate monetary policy interest-rate-to-performance sensitivity of the European banking sector over the 07/2012–06/2017 period when interest rates were (close to) zero. We apply the Wordscores approach to introductory statements of ECB's Governing Council press conferences to estimate a ‘shadow prime rate’. Based on short-run intraday event windows, we find shadow prime rate changes positively affect changes in the EURO-STOXX-Banks Future. Our findings add to the recent evidence documenting that banks benefit from increasing interest rate levels in a low-interest-rate environment.

Keywords: ECB; central bank communication; banking sector; interest rate sensitivity; textual analysis; Wordscores (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G14 G21 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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