Retail Bank Interest Rate Pass-Through

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  • Retail Bank Interest Rate Pass-Through Book Detail

  • Author : Gabe de Bondt
  • Release Date : 2004
  • Publisher :
  • Genre :
  • Pages : 43
  • ISBN 13 :
  • File Size : 73,73 MB

Retail Bank Interest Rate Pass-Through by Gabe de Bondt PDF Summary

Book Description: This paper presents an error-correction model of the interest rate pass-through process based on a marginal cost pricing framework including switching and asymmetric information costs. Estimation results for the euro area suggest that the proportion of the pass-through of changes in market interest rates to bank deposit and lending rates within one month is at its highest around 50%. The interest rate pass-through is higher in the long term and notably for bank lending rates close to 100%. Moreover, a cointegration relation exists between retail bank and comparable market interest rates. Robustness checks, consisting of impulse responses based on VAR models and results for a sub-sample starting in January 1999, show qualitatively similar findings. However, the sub-sample results are supportive of a quicker pass-through process since the introduction of the euro.

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