Expected monetary policy and the dynamics of bank lending rates

Claudia Kwapil and Johann Scharler

International Review of Economics & Finance, 2013, vol. 27, issue C, 542-551

Abstract: In this paper we explore empirically to what extent expected monetary policy matters for the dynamics of bank lending rates in the U.S. and in the U.K. Based on endogenously determined break points, we document a number of structural breaks in the relationship between expected policy and retail interest rates. We find that banks have increasingly behaved in a forward-looking fashion by taking expected changes in monetary policy rates into account. Overall, our results provide support for the hypothesis that monetary policy has become more effective by successfully influencing private sector expectations.

Keywords: Monetary policy; Expectations; Interest rate pass-through (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (9)

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Working Paper: Expected Monetary Policy and the Dynamics of Bank Lending Rates (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:27:y:2013:i:c:p:542-551

DOI: 10.1016/j.iref.2013.01.010

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