EconPapers    
Economics at your fingertips  
 

Interest rate transmission in the UK: a comparative analysis across financial firms and products

Ana-Maria Fuertes () and Shelagh A. Heffernan
Additional contact information
Shelagh A. Heffernan: Cass Business School, City University London, UK, Postal: Cass Business School, City University London, UK

International Journal of Finance & Economics, 2009, vol. 14, issue 1, 45-63

Abstract: This paper differentiates itself from the existing literature by testing for heterogeneities in the interest rate transmission mechanism using a large sample of 662 monthly retail rate histories (1993-2004) on seven key deposit and loan products. Error correction models are estimated to analyse the long-run pass-through, the long-run mark-up and the short-run speed of adjustment. The prediction that the official and retail rates move together in the long run is supported by the data. The evidence suggests weak between-product heterogeneity but notable differences were found between financial firms in the way they adjust their rates, which could hinder the achievement of monetary policy objectives. Consumer responses to official rate changes could therefore be more phased and intricate than hitherto believed. Heterogeneity in adjustment is found to be linked to menu costs and key financial ratios under managerial control. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1002/ijfe.366 Link to full text; subscription required (text/html)

Related works:
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:ijf:ijfiec:v:14:y:2009:i:1:p:45-63

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

DOI: 10.1002/ijfe.366

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2020-02-09
Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:1:p:45-63