The Interactions between the Lending Rates, Deposit Rates and Money Market Rates

Manel Mansour1, *2, 3, 4 (), Asma Sghaier (), Boutheina Banour () and Sami Ben Jabeur ()
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Manel Mansour1, *2, 3, 4: University of Sousse, Susah, Tunisia.
Asma Sghaier: LaMIDED, University of Sousse, Susah, Tunisia.
Boutheina Banour: University of Sousse, Susah, Tunisia.
Sami Ben Jabeur: IPAG Business School, Paris, France.

Iranian Economic Review (IER), 2019, vol. 23, issue 1, 163-189

Abstract: The present paper investigates the impact of the financial crisis on the interaction between the lending rates, deposit rates and money market rates through the process of retail bank interest rate pass-through in the countries of the Euro area. Among our findings is the heterogeneity of bank rate adjustments across sectors, loans and deposits. That was mainly marked during the pre-crisis period by a complete or high long-term pass-through for deposit rates and incomplete for lending rates. However, in the post-crisis period, the degree of pass-through dropped for all bank rates. In addition, we see that the bank rates have become more rigid due to market turbulence since the speed of adjustment towards equilibrium slowed down significantly. Finally, the results show that there is an interdependence of banks' decisions on lending rates as well as deposit rates. It is thus a valuable input in the transmission mechanism of monetary policy.

Keywords: Interest Rate Pass-through; Interactions; Money Market Rate; Lending Rates; Deposit Rates; Financial Crisis; Euro Area. (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:23:y:2019:i:1:p:163

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