The Pass Through of Monetary Policy to Euro Area Bank Interest Rates

Michail Nektarios () and Louka Kyriaki
Additional contact information
Michail Nektarios: 87194 Central Bank of Cyprus , Nicosia, Cyprus
Louka Kyriaki: 87194 Central Bank of Cyprus , Nicosia, Cyprus

German Economic Review, 2025, vol. 26, issue 2, 131-192

Abstract: We examine the transmission of monetary policy to bank interest rates in the euro area, using a rolling estimation. The results, using various fixations for the Euribor rate and different maturities for bond yields, suggest that the pass through of policy rates to bank interest rates was relatively stable prior to the use of unconventional monetary policy measures. After the use of unconventional policies, the pass-through multiplier from the Euribor rate and the short-term bonds increased, while the pass-through from longer-term bonds markedly decreased. It appears that unconventional monetary policy operations allow for bank lending rates to further decline, which could lead to higher lending, with potential financial stability issues arising. In addition to the excess liquidity created by asset purchases, factors such as credit risk and house price growth also appear to impact the pass through.

Keywords: pass through, deposit beta, Euro area, asset purchases; monetary policy; bank interest rates (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ger-2023-0084 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:germec:v:26:y:2025:i:2:p:131-192:n:1001

Ordering information: This journal article can be ordered from
https://www.degruyte ... journal/key/ger/html

DOI: 10.1515/ger-2023-0084

Access Statistics for this article

German Economic Review is currently edited by Peter Egger, Almut Balleer, Jesus Crespo-Cuaresma, Mario Larch, Aderonke Osikominu and Georg Wamser

More articles in German Economic Review from De Gruyter
Bibliographic data for series maintained by Peter Golla ().