What drove the rise in bank lending rates in Lithuania during the low-rate era?

Jaunius Karmelavičius, Ieva Mikaliunaite-Jouvanceau and Andrius Buteikis
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Jaunius Karmelavičius: Bank of Lithuania
Andrius Buteikis: Bank of Lithuania

No 43, Bank of Lithuania Occasional Paper Series from Bank of Lithuania

Abstract: While Euro area interest rates were responding to accommodative monetary policy and 201519, in stark contrast, Lithuania’s bank lending rates increased. decreasing throughout Although the rates have slightly dropped around t he onset of the pandemic, they are still question, what were the elevated and well above the EA figures. This paper calls into drivers of such interest rate dynamics in Lithuania? By analysing the historical events and practical aspects of loan pricing in Lithuania’s banking industry, we build an empirical lending rate variation across banks, time and lending segments, and model that exploits maps it to different drivers of pricing. We find that the recent changes in lending rates in response to changes can be attributed to avera ge bank margins, which moved largely in market concentration.

Keywords: interest rates; loan pricing; banking; concentration; capital requirements (search for similar items in EconPapers)
JEL-codes: D22 D40 E43 G21 L11 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022-05-20
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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