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Interest Rate Transmission to Commercial Credit Rates in Austria

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  • Johann Burgstaller

Abstract

The transmission process from policy-controlled interest rates to bank lending rates deserves reconsideration owing to the implementation of the European Monetary Union (EMU) in 1999. Additional attention to the subject in Austria is due to several large banks which, in 2002, have been charged for not passing on interest rate decreases to their customers. I examine dynamic responses of commercial credit rates to changes in key policy rates and money market rates. Using Austrian data from 1995 to 2002, I show that strength and speed of interest rate transmission depend on whether rates go up or down. With the EMU, asymmetry in interest rate transmission partly declined. The speed of transmission and the relative importance of policy and money market rates for commercial credit rates also were affected.

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Bibliographic Info

Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2003-06.

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Date of creation: May 2003
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Handle: RePEc:jku:econwp:2003_06

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Keywords: Monetary policy transmission; interest rate pass-through; bank lending rates for commercial credit; European Monetary Union; impulse-response analysis;

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  2. Claudio E. V. Borio & Wilhelm Fritz, 1995. "The response of short-term bank lending rates to policy rates: a cross-country perspective," BIS Working Papers 27, Bank for International Settlements.
  3. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
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  6. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  7. Carlo Cottarelli & Angeliki Kourelis, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 587-623, December.
  8. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-42, October.
  9. Weth, Mark A., 2002. "The pass-through from market interest rates to bank lending rates in Germany," Discussion Paper Series 1: Economic Studies 2002,11, Deutsche Bundesbank, Research Centre.
  10. Linda A. Toolsema & Jan-Egbert Sturm & Jakob de Haan, 2001. "Convergence of Monetary Transmission in EMU New Evidence," CESifo Working Paper Series 465, CESifo Group Munich.
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  14. repec:wop:humbsf:1999-4 is not listed on IDEAS
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Cited by:
  1. Gianluca Di Lorenzo & Giuseppe Marotta, 2006. "Multiple breaks in lending rate pass-through A cross country study for the euro area," Department of Economics 0524, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
  2. Marotta, Giuseppe, 2009. "Structural breaks in the lending interest rate pass-through and the euro," Economic Modelling, Elsevier, vol. 26(1), pages 191-205, January.
  3. Giuseppe Marotta, 2006. "Structural breaks in the interest rate pass-through and the euro. A cross-country study in the euro area and the UK," Department of Economics 0549, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
  4. Haughton, Andre Yone & Iglesias, Emma M., 2012. "Interest rate volatility, asymmetric interest rate pass through and the monetary transmission mechanism in the Caribbean compared to US and Asia," Economic Modelling, Elsevier, vol. 29(6), pages 2071-2089.
  5. Chionis, Dionysios P. & Leon, Costas A., 2006. "Interest rate transmission in Greece: Did EMU cause a structural break?," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 453-466, May.
  6. Naszódi, Anna & Krekó, Judit & Horváth, Csilla, 2005. "Kamatátgyűrűzés Magyarországon
    [Interest rate pass-through in Hungary (1997-2004)]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 356-376.
  7. Karagiannis, Stelios & Panagopoulos, Yannis & Vlamis, Prodromos, 2010. "Interest rate pass-through in Europe and the US: Monetary policy after the financial crisis," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 323-338, May.

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