Interest Rate Pass-Through in the Euro Area during the Financial Crisis: a Multivariate Regime-Switching Approach

David Aristei () and Manuela Gallo

No 107/2012, Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia

Abstract: In this paper we use a Markov-switching vector autoregressive model to analyse the interest rate pass-through between interbank and retail bank interest rates in the Euro area. Empirical results, based on monthly data for the period 2003-2011, show that during periods of financial distress bank lending rates to both households and non-financial corporations show a reduction of their degree of pass-through from the interbank rate. Interest rates on loans to non-financial firms are found to be more affected by changes in the interbank rate than loans to households, both in times of high volatility and in normal market conditions.

Keywords: Interest rate pass-through, financial crisis, interbank interest rate; loans interest rate; Regime-switching vector autoregressive models; Euro area. (search for similar items in EconPapers)
JEL-codes: C32 E43 E58 G01 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-10-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Journal Article: Interest rate pass-through in the Euro area during the financial crisis: A multivariate regime-switching approach (2014)
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