Hampered interest rate pass-through: A supply side story?

Lotta Heckmann and Julia Moertel

No 59/2020, Discussion Papers from Deutsche Bundesbank

Abstract: This paper shows that the supply side of credit is a major factor for the phenomenonof hampered interest rate pass-through in monopolistic banking markets. Our data,covering all 1,555 small and medium sized banks in Germany, provides a clear wayto partial out demand shocks; we are thus able to show that while market-powerbanks charge higher loan rates, they spare their borrowers a part of exogenousupward shifts in the yield curve and furthermore withhold a substantial part ofrising market rates from their depositors. Because high market-power banks inour sample are relatively more profitable, they seem to be able to insure theirrelationship-customers against adverse shocks.

Keywords: interest rate pass-through; bank competition; credit supply (search for similar items in EconPapers)
JEL-codes: E43 E51 E52 G21 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban and nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:592020

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