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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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Author Info
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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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
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Handle: RePEc:mod:modena:0612

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Web page: http://www.economia.unimore.it
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Keywords: Interest rates Monetary policy Economic and Monetary Union (EMU) Cointegration analysis Structural breaks

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Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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