Structural and Cyclical Determinants of Bank Interest-Rate Pass-Through in the Eurozone

Aurélien Leroy and Yannick Lucotte

Comparative Economic Studies, 2016, vol. 58, issue 2, 196-225

Abstract: This paper empirically investigates the evolution and sources of interest-rate pass-through heterogeneity in the Eurozone for a sample of 11 Euro area countries over the period 2003M1–2013M12. Our findings, based on a panel error correction model approach and a panel interaction vector autoregressive framework, indicate that risk factors, as well as differences in financial market structures across countries, explain the heterogeneity of monetary transmission in the EU. In terms of policy implications, this means that future reforms promoting a more efficient and homogeneous monetary policy transmission should not only focus on risk factors but also should attempt to consolidate financial integration.

Date: 2016
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Working Paper: Structural and cyclical determinants of bank interest rate pass-through in Eurozone (2015)
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