Deposit interest rate pass-through in Central and Eastern European countries before and after 2021

Gabor Hajnal, Balint Dancsik, Zsuzsanna Hosszu and Akos Attila Ozoroczy

Central Bank Review, 2025, vol. 25, issue 3

Abstract: The study analyzes interest rate pass-through for household and corporate deposits in specific markets in the Central and Eastern European (CEE) region, with a focus on the tightening cycle that began in mid-2021. This period is of particular interest to monetary policy, as sharp rate hikes by central banks, in response to a high inflationary environment, followed a period characterized by an abundance of liquidity. We examine the relationship between interbank and deposit interest rates using two methods: wavelet transform and error-correction model. Based on the wavelet analysis, we found a weakening of pass-through and a slowdown in the repricing of deposit interest rates during the tightening cycle across the countries of the CEE region, particularly in the household segment. Using error-correction models, we observe a consistent weakening in both the degree and speed of interest rate pass-through in the Hungarian and Polish deposit markets during the tightening cycle. The extent of pass-through declined most in the Hungarian household deposit market among all CEE countries.

Keywords: Deposit interest rates; Interest rate pass-through; Wavelet transform; Error-correction model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:cebare:v:25:y:2025:i:3:article:100204

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