The interest rate pass-through in the euro area during the sovereign debt crisis

Julia von Borstel, Sandra Eickmeier and Leo Krippner

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We investigate the pass-through of monetary policy to bank lending rates in the euro area before and during the sovereign debt crisis. We make the following contributions. First, we use a factor-augmented vector autoregression, which allows us to assess the responses of a large number of country-specific interest rates and spreads. Second, we analyze the effects of monetary policy on the components of the interest rate pass-through, which reflect banks funding risk (including sovereign risk) and markups charged by banks over funding costs. Third, we not only consider conventional but also unconventional monetary policy. We find that while the transmission of conventional monetary policy to bank lending rates has not changed with the crisis, the composition of the IP has changed. Expansionary conventional monetary policy lowered sovereign risk in peripheral countries and longer-term bank funding risk in peripheral and core countries during the crisis, but has been unable to lower banks markups. Unconventional monetary policy helped decreasing lending rates, mainly due to large shocks rather than a strong propagation.

JEL-codes: C32 E43 E52 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: The interest rate pass-through in the euro area during the sovereign debt crisis (2016)
Working Paper: The interest rate pass-through in the euro area during the sovereign debt crisis (2015)
Working Paper: The interest rate pass-through in the euro area during the sovereign debt crisis (2015)
Working Paper: The interest rate pass-through in the euro area during the sovereign debt crisis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113035

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