Retail bank interest rate pass-through: new evidence at the euro area level

Gabe de Bondt

No 136, Working Paper Series from European Central Bank

Abstract: This paper presents an error-correction model of the interest rate pass-through process based on a marginal cost pricing framework including switching and asymmetric information costs. Estimation results for the euro area suggest that the proportion of the pass-through of changes in market interest rates to bank deposit and lending rates within one month is at its highest around 50%. The interest rate pass-through is higher in the long term and notably for bank lending rates close to 100%. Moreover, a cointegration relation exists between retail bank and comparable market interest rates. Robustness checks, consisting of impulse responses based on VAR models and results for a sub-sample starting in January 1999, show qualitatively similar findings. However, the sub-sample results are supportive of a quicker pass-through process since the introduction of the euro. JEL Classification: E43, G21

Keywords: euro area; market interest rates; retail bank interest rates (search for similar items in EconPapers)
Date: 2002-04
Note: 337418
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (172)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp136.pdf (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:ecb:ecbwps:2002136

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().