What drove the rise in bank lending rates in Lithuania during the low-rate era?

Jaunius Karmelavičius, Ieva Mikaliūnaitė-Jouvanceau () and Andrius Buteikis
Additional contact information
Jaunius Karmelavičius: Financial Stability Department, Bank of Lithuania, Vilnius, Lithuania
Ieva Mikaliūnaitė-Jouvanceau: Financial Stability Department, Bank of Lithuania, Vilnius, Lithuania
Andrius Buteikis: Financial Stability Department, Bank of Lithuania, Vilnius, Lithuania

Baltic Journal of Economics, 2023, vol. 23, issue 2, 162-199

Abstract: While Euro area interest rates were responding to accommodative monetary policy and decreasing throughout 2015-2019, in stark contrast, Lithuania's bank lending rates increased. Although the rates dropped slightly around the onset of the pandemic, they are still elevated and well above the EA figures. This paper asks the question: what were the drivers of such interest rate dynamics in Lithuania? By analysing the historical events and practical aspects of loan pricing in Lithuania's banking industry, we build an empirical model that exploits lending rate variation across banks, time and lending segments, and maps it to different drivers of pricing. We find that the recent changes in lending rates can be attributed to average bank margins, which moved largely in response to changes in market concentration.

Keywords: Interest rates; loan pricing; banking; concentration; capital requirements (search for similar items in EconPapers)
JEL-codes: D22 D40 E43 G21 L11 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2023.2260587 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:23:y:2023:i:2:p:162-199

Access Statistics for this article

More articles in Baltic Journal of Economics from Baltic International Centre for Economic Policy Studies Contact information at EDIRC.
Bibliographic data for series maintained by Anna Zasova ().