Interest Rate Pass-through under a Currency Board Regime: Evidence from Bosnia & Herzegovina

Emina Milišić and Emina Žunić Dželihodžić
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Emina Milišić: Central Bank of Bosnia and Herzegovina
Emina Žunić Dželihodžić: Central Bank of Bosnia and Herzegovina

No 10-2024, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper examines the pass-through of European Central Bank (ECB) monetary policy to deposit rates in Bosnia and Herzegovina (B&H). We use aggregate and bank-level data to study interest rate pass-through by bank size and ownership for the period 2012-2023. In extensions, we also study pass-through by counterparty and maturity of deposit contracts. Our results suggest that average pass-through is slow and incomplete. We document that pass-through is faster and more complete for banks which are small and foreign-owned, as compared to banks which are large (and foreign-owned), or banks which are small and domestic. This finding suggests that pass-through depends both on domestic market power of banks as well as their access to foreign money markets.

Keywords: monetary policy; transmission mechanism; deposit rates; currency board (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 E60 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-07-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mon, nep-pay and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp10-2024

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