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Interest Rate Pass-through During the Global Financial Crisis: The Case of Sweden

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  • Niels-Jakob Harbo Hansen
  • Peter Welz

Abstract

A stable relationship between monetary policy rates and bank lending and deposit rates faced by consumers and companies is essential for the effective transmission of monetary policy decisions. This paper studies how changes in the policy rate set by the Swedish central bank, the Riksbank, have been transmitted to money market rates and, in turn, to retail rates before and during the financial turmoil that erupted in summer 2007. Historically, the Riksbank has been successful in effectively controlling money market rates, but during the financial turmoil the transmission of impulses from the policy rate to money market rates appears to have been weakened by elevated and volatile risk premia, although these increased less in Sweden than in the euro area, United Kingdom and United States. The pass-through from money market rates to retail rates is found to have been complete, but sluggish, before the turmoil. Pass-through was also faster into short-term loan rates for non-financial companies than for households. During the turmoil the pass-through from money market to lending rates has been preserved at short maturities, but not at longer maturities. Lack of access to long-term funding has likely played a role. Le canal de transmission des taux d'intérêt pendant la crise financière mondiale : le cas de la Suède L’existence d’une relation stable entre les taux d’intérêt fixés par les autorités monétaires et les taux que les banques offrent aux ménages et aux entreprises est essentielle pour la transmission des décisions de politique monétaire. Cet article étudie comment les changements de taux d’intérêt de la banque centrale de Suède, la Riksbank, se répercutent sur les taux du marché monétaire, puis sur les taux proposés par les institutions financières à leurs clients, avant et pendant la crise financière démarrant en 2007. Le contrôle de la Riksbank sur les taux du marché monétaire, fort au court des dernières années, apparaît affaibli par l’importance et la volatilité des primes de risque depuis l’été 2007, même si ces dernières ont moins augmenté en Suède que dans d’autres pays de l’OCDE. La transmission des variations des taux du marché monétaire aux taux offerts par les institutions financières semble avoir été complète avant la crise, bien que lente. Elle était aussi plus rapide pour les prêts de court terme aux entreprises non-financières que pour les prêts aux ménages. Pendant la crise, le canal de transmission des taux du marché monétaire aux taux offerts par les institutions financières a été préservé pour les courtes maturités, mais affaibli pour les longues maturités. Le manque d’accès à des financements de long terme a pu jouer un rôle.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 855.

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Date of creation: 08 Apr 2011
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Handle: RePEc:oec:ecoaaa:855-en

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Keywords: Sweden; interest rate pass-through; financial crisis; monetary transmission; canaux de transmission de la politique monétaire; transmission des taux d’intérêt; Suède; crise financière;

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Cited by:
  1. Robert A. Ritz & Ansgar Walther, 2014. "How do banks respond to increased funding uncertainty?," Cambridge Working Papers in Economics 1414, Faculty of Economics, University of Cambridge.
  2. David ARISTEI & Manuela Gallo, 2012. "Interest Rate Pass-Through in the Euro Area during the Financial Crisis: a Multivariate Regime-Switching Approach," Quaderni del Dipartimento di Economia, Finanza e Statistica 107/2012, Università di Perugia, Dipartimento Economia, Finanza e Statistica.

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