The interest rate pass-through in the Euro area during the global financial crisis

Nikolay Hristov, Oliver Hülsewig and Timo Wollmershäuser

Journal of Banking & Finance, 2014, vol. 48, issue C, 104-119

Abstract: This paper uses panel vector autoregressive (VAR) models for euro area member countries to explore the widening of retail bank interest rate spreads that emerged in the course of the global financial crisis. We find that the interest rate pass-through was generally complete on impact before the outbreak of the financial crisis, but became significantly distorted in the period thereafter, which hampered the effectiveness of monetary policy. Empirical evidence suggests that the decrease in the interest rate pass-through can be related to a change in the structural parameters characterizing the economies and a substantial increase in the average size of structural shocks. DSGE model simulations show that an increase in the frictions that banks are subject to can explain the decrease in the retail bank interest rate pass-through.

Keywords: Euro area; Interest rate pass-through; Global financial crisis; Panel vector autoregressive model; Sign restrictions (search for similar items in EconPapers)
JEL-codes: E40 E43 E52 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (86)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426614002714
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis (2013)
Working Paper: The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis (2012)
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:eee:jbfina:v:48:y:2014:i:c:p:104-119

DOI: 10.1016/j.jbankfin.2014.08.004

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().