Banking competition and interest rate pass-through

Stefanie Kleimeier and Harald Sander

Chapter 14 in Handbook of Competition in Banking and Finance, 2017, pp 305-322 from Edward Elgar Publishing

Abstract: The interest rate pass-through (PT) from the central bank’s main policy interest rate to bank lending and deposit interest rates is central to monetary policy transmission. However, in many countries the effectiveness of the monetary policy is limited by a slow, incomplete, and asymmetric PT. Within a currency union, the effectiveness of a common monetary policy is furthermore restricted by the cross-country heterogeneity of the PT. Differences in banking competition are an important though not necessarily a sole source of this heterogeneity. This chapter provides a review of the empirical PT literature and pays specific attention to the effects of banking market competition. While the evidence for a positive impact of competition on the PT is overwhelming, empirical studies differ in terms of pass-through methodology and measurement of competition, and a best-practice approach has yet to emerge. The authors consequently propose a broad-based rather than a single competition measure: the use of (combinations of) various competition indicators, such as market shares, price elasticity of demand, and conjectural variation; and the investigation of the impact of different, complementary sources of competition from banks, non-banks, markets, and foreign competition.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/9781785363290.00022.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

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:elg:eechap:16878_14

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().