Structural breaks in the interest rate pass-through and the euro. A cross-country study in the euro area and the UK

Giuseppe Marotta

Department of Economics from University of Modena and Reggio E., Faculty of Economics "Marco Biagi"

Abstract: We search for breaks in the short term business lending rate pass-through in euro countries, possibly associated with the introduction of the euro. One break is detected in six national retail rates among EMU countries; two breaks are found in other six cases, and in the UK as well. The last break occurs much earlier for France while several quarters later for other countries, suggesting a loose link if ever with the event. Pass-throughs decrease (except for France), becoming even more incomplete (except for Netherlands); though the adjustment to equilibrium is faster, cross-country heterogeneity remains fairly large. With the new harmonized interest rates database, available since 2003, pass-throughs are much closer to one, especially for larger loans.

Keywords: Interest rates; Monetary policy; Economic and Monetary Union (EMU); Cointegration analysis; Structural breaks (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 F36 (search for similar items in EconPapers)
Pages: pages 34
Date: 2006-12
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Working Paper: Structural breaks in the interest rate pass-through and the euro. A cross-country study in the euro area and the UK (2006)
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