Is the ECB Monetary tightening effective? The role of bank funding and asset structure

Matjaž Volk

Applied Economics Letters, 2025, vol. 32, issue 4, 460-463

Abstract: This paper analyses the transmission of the ECB policy rate to bank deposit rates. From June to December 2022, the policy rate increased by 2.5pp, while deposit rates in euro area banks increased only by 0.2pp. The pass-through was not perfect even in the previous cycle between 2005 and 2008, but it was nevertheless much higher. I show that the two main factors behind a sluggish response in deposit rates are the sizable amount of deposits and liquidity in banks’ books. These effects work against ECB’s efforts to restore price stability by tightening monetary policy.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2023.2275217 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:32:y:2025:i:4:p:460-463

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2023.2275217

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().