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Mending the broken link: Heterogeneous bank lending rates and monetary policy pass-through

Carlo Altavilla (), Fabio Canova () and Matteo Ciccarelli

Journal of Monetary Economics, 2020, vol. 110, issue C, 81-98

Abstract: We analyse the pass-through of monetary policy measures to lending rates to households and firms in the euro area using novel bank-level datasets. Banks’ characteristics such as the capital ratio, exposure to domestic sovereign debt, percentage of non-performing loans and stability of funding structure are responsible for the heterogeneity in the pass-through of conventional monetary policy changes. The location of a bank is irrelevant. Non-standard measures reduce lending rate heterogeneities. Banks located in financially stressed countries and with weak balance sheets are most affected. Banks’ lending margins have fallen considerably.

Keywords: Monetary policy pass-through; Dynamic heterogeneity; Bank lending channel; Lending margins (search for similar items in EconPapers)
JEL-codes: C23 E44 E52 G21 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jmoneco.2019.01.001

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