The Determinants of Pass-Through of Market Conditions to Bank Retail Interest Rates in Belgium
AbstractWe analyse the pass-through of money market rates to retail interest rates at the disaggregate level in the Belgian banking market. First, we measure the extent of pass-through for a total of fourteen products. We find that the response varies over loans and deposits and depends positively on the maturity of the product. Second, the launch of EMU has generally not resulted in more competitive pricing by banks. Third, we assess the importance of several biases and find that heterogeneity in price-setting behaviour should be accounted for in analysing the pass-through. Fourth, we analyse bank-specific determinants of heterogeneous interest rate pass-through. We find a role for capital, liquidity and market share and we relate these results to the various channels in monetary policy transmission and to the structure-conduct-performance hypothesis in banking.
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Bibliographic InfoPaper provided by National Bank of Belgium in its series Working Paper Research with number 47.
Length: 47 pages
Date of creation: May 2004
Date of revision:
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pass-through; Heterogeneous panel; aggregation bias; panel cointegration; retailbanking; bank-level interest rates; bank-level determinants;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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