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Term structure and the sluggishness of retail bank interest rates in euro area countries

Author

Listed:
  • Mojon, Benoît
  • Valla, Natacha
  • de Bondt, Gabe

Abstract

This paper analyses the pricing of bank loans and deposits in euro area countries. We show that retail bank interest rates adjust not only to changes in short term interest rates but also to long-term interest rates. This result, which is arguably intuitive for long-term retail bank rates, is also confirmed for bank interest rates on short-term instruments. The transmission of changes in short-term market interest rates along the yield curve is found to be a key factor explaining the sluggishness of retail bank interest rates. We also show that in the cases where we cannot reject that the adjustment of retail rates has changed since the introduction of the euro, this adjustment has become faster. JEL Classification: E43, G21

Suggested Citation

  • Mojon, Benoît & Valla, Natacha & de Bondt, Gabe, 2005. "Term structure and the sluggishness of retail bank interest rates in euro area countries," Working Paper Series 518, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2005518
    Note: 1792986
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp518.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    euro area countries; market interest rates; retail bank interest rates;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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