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Beyond the Interest Rate Pass-through: Monetary Policy and Banks Interest Rates during the Effective Lower Bound

Christophe Blot () and Fabien Labondance ()
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Christophe Blot: Sciences Po – OFCE & Université Paris Ouest Nanterre - EconomiX

No 2021-03, Working Papers from CRESE

Abstract: We investigate whether monetary policy influences the retail interest rates in the Euro Area when the policy rate reaches the effective lower bound. We estimate a panel-Error Correction Model that accounts for potential heterogeneities in the transmission of monetary policy. The analysis disentangles alternative non-standard measures implemented by the ECB. We find that unconventional measures have influenced banking interest rates beyond the pass-through of the current and expected policy rate. These effects are driven by liquidity provisions in core countries and by covered bond purchase programmes in peripheral ones.

Keywords: Unconventional measures; retail interest rate; Heterogeneous panel (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2021-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
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