Nonlinear interest rate-setting behaviour of German commercial banks
Heinzelmann Ludwig () and
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Heinzelmann Ludwig: PwC Strategy & (Germany) GmbH, Friedrichstraße 14, 70174 Stuttgart, Germany
Missong Martin: University of Bremen, Faculty of Business Studies and Economics, Enrique-Schmidt-Str. 1, 28359 Bremen, Germany
Studies in Nonlinear Dynamics & Econometrics, 2020, vol. 24, issue 3, 28
We quantitatively analyse the interest rate-setting behaviour of German commercial banks during the period 2003–2014, using nonlinear (smooth transition) cointegration approaches. Our empirical results reveal principles applied by commercial banks in (re-)gaining margins in the aftermath of the financial crisis. We substantiate our findings using economic arguments from a bank management perspective. As our study contributes to a better understanding of the pass-through mechanism from market to commercial banks’ customer interest rates, the results will also be relevant to meaningful assessments of the effectiveness of monetary policy measures.
Keywords: banking; financial crisis; interest rate pass-through; interest rate-setting; smooth transition regression models (search for similar items in EconPapers)
JEL-codes: C58 E43 G21 (search for similar items in EconPapers)
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