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Structural breaks in the interest rate pass-through and the euro. A cross-country study in the euro area and the UK

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  • Giuseppe Marotta

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Abstract

We search for breaks in the short term business lending rate pass-through in euro countries, possibly associated with the introduction of the euro. One break is detected in six national retail rates among EMU countries; two breaks are found in other six cases, and in the UK as well. The last break occurs much earlier for France while several quarters later for other countries, suggesting a loose link if ever with the event. Pass-throughs decrease (except for France), becoming even more incomplete (except for Netherlands); though the adjustment to equilibrium is faster, cross-country heterogeneity remains fairly large. With the new harmonized interest rates database, available since 2003, pass-throughs are much closer to one, especially for larger loans.

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Bibliographic Info

Paper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica in its series Heterogeneity and monetary policy with number 0612.

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Length: pages 34
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:mod:modena:0612

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Keywords: Interest rates; Monetary policy; Economic and Monetary Union (EMU); Cointegration analysis; Structural breaks;

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Cited by:
  1. Giuseppe Marotta, 2008. "Lending interest rate pass-through in the euro area. A data-driven tale," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 08101, Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi".

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