Interest rate pass-through in the Euro area during the financial crisis: A multivariate regime-switching approach

David Aristei and Manuela Gallo

Journal of Policy Modeling, 2014, vol. 36, issue 2, 273-295

Abstract: In this paper we use a Markov-switching vector autoregressive model to analyse the interest rate pass-through between interbank and retail bank rates in the Euro area. Empirical results, based on monthly data for the period 2003–2011, show that during periods of financial distress bank lending rates to both households and non-financial corporations show a reduction of their degree of pass-through from the money market rate. Significant sectoral heterogeneities characterise the transmission mechanism of monetary policy impulses, with rates on loans to non-financial firms being more affected by changes in the interbank rate than loans to households, both in times of high volatility and in normal market conditions.

Keywords: Interest rate pass-through; Financial crisis; Interbank interest rate; Regime-switching vector autoregressive models; Euro area (search for similar items in EconPapers)
JEL-codes: C32 E43 E58 G01 G21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (72)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0161893814000118
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Interest Rate Pass-Through in the Euro Area during the Financial Crisis: a Multivariate Regime-Switching Approach (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:jpolmo:v:36:y:2014:i:2:p:273-295

DOI: 10.1016/j.jpolmod.2013.12.002

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().