Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away?

Jesus Crespo Cuaresma, Balázs Égert and Thomas Reininger ()
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Thomas Reininger: Oesterreichische Nationalbank, Foreign Research Division, http://www.oenb.at

Focus on European Economic Integration, 2006, issue 1, 88-111

Abstract: In this study, we seek to better understand the interest rate pass-through in fi ve Central and Eastern European countries – the Czech Republic, Hungary, Poland, Slovakia and Slovenia, the CEE-5 – and compare it with the pass-through in selected euro area countries – Austria, Germany and Spain. We fi nd that the pass-through is not operational for long-term market rates because of the unstable yield curve. We fi nd evidence that the pass-through from policy rates even transits through short-term market rates to long-term retail rates. Although nearly complete pass-through is detected for corporate lending rates in a majority of the CEE-5, pass-through estimates for several retail rates are generally lower than those reported in the literature, given the absence of cointegration between policy rates and long- or even short-term market rates. Although the pass-through is usually higher in the CEE-5 than in Austria and Germany, it has been declining over time in particular in Hungary and (with respect to lending rates) in Poland. The adoption of the euro seems to have slightly increased the pass-through in Spain and Austria but not in Germany.

Date: 2006
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Related works:
Journal Article: Interest rate pass-through in central and Eastern Europe: Reborn from ashes merely to pass away? (2007)
Working Paper: Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away? (2006)
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