Interest rate pass through in a Markov-switching Vector Autoregression model: Evidence from Greek retail bank interest rates
Stephanos Papadamou () and
The Journal of Economic Asymmetries, 2018, vol. 17, issue C, 48-60
In this paper, we investigate the relationship between Euro Overnight Index Average interest rate (EONIA) and retail Greek bank interest rates in a Markov-switching Vector Autoregression model. Monthly data is used for household and corporate deposit and credit rates since 1999. Two regimes are defined based on high and low interest rate volatility. A separate set of impulse responses for each Markov regime are drawn in order to identify any differences in the retail rates transmission. The results prove that banks in order to assure their resources for a longer term during high variance periods increase significantly their deposit rate after an interbank rate positive shock. They also present a preference to corporations over households. The duration of the responses for deposit rates over the turbulence periods of high volatility show the vital role of Greek deposits on funding of Greek banks.
Keywords: Vector Autoregression; Regime switching; Retail rates; Interest rate pass-through (search for similar items in EconPapers)
JEL-codes: E42 E43 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:17:y:2018:i:c:p:48-60
Access Statistics for this article
The Journal of Economic Asymmetries is currently edited by A.G. Malliaris
More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().