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The Evolution of Loan Rate Stickiness Across the Euro Area

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Author Info
Jouchi Nakajima (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: jouchi.nakajima-1 @boj.or.jp))
Yuki Teranishi (Associate Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: yuuki.teranishi @boj.or.jp))

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Abstract

To investigate the banking sector integration across euro area countries in terms of loan interest rate stickiness, we estimate structural loan rate curves for 12 euro area countries using time-varying regressions with stochastic volatility. Our results show that the loan rates are sticky to a policy interest rate in all countries for all loan maturities, the degree of stickiness differs across the countries, and the degree of difference is more prominent for longer loan maturities. For short-term loans, the loan rate stickiness decreases and for intermediate- and long-term loans the loan rate stickiness converge to average levels during the sample periods. Banking integration in the euro area is not yet complete, but the degree of heterogeneity in the loan rate stickiness decreases.

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Publisher Info
Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-010.

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Date of creation: Mar 2009
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Handle: RePEc:ime:imedps:09-e-010

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Related research
Keywords: banking integration; sticky loan interest rate; Bayesian analysis; time-varying regression; Markov chain Monte Carlo;

Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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This page was last updated on 2009-11-25.

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