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Bank interest rate pass-through in the euro area: a cross country comparison

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  • Kok, Christoffer
  • Werner, Thomas

Abstract

The present paper investigates the pass-through between market interest rates and bank interest rates in the euro area. Compared to the large interest rate pass-through literature the paper mainly improves upon two points. First, a novel data set, partially based on new harmonised ECB bank interest rate statistics is used. Moreover, the market rates are selected in a way to match the maturities of bank and market rates using information provided by the new statistics. Secondly, new panel-econometric methods are applied to test for heterogeneity in the pass-through process. The paper shows a large heterogeneity in the pass-through of market rates to bank rates between euro area countries and finally possible explanations of the heterogeneity are discussed. JEL Classification: E43, G21

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Paper provided by European Central Bank in its series Working Paper Series with number 0580.

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Date of creation: Jan 2006
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Handle: RePEc:ecb:ecbwps:20060580

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Keywords: Euro area countries; Interest rate pass-through; Panel Cointegration;

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