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Competition, transmission and bank pricing policies: Evidence from Belgian loan and deposit markets

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  • F. DE GRAEVE

    ()

  • O. DE JONGHE

    ()

  • R. VANDER VENNET

    ()

Abstract

This paper analyses the pass-through of money market rates to retail interest rates in the Belgian banking market using disaggregate data and allowing for heterogeneous price setting behavior. We find that 1) corporate loans are priced more competitively than consumer loans, 2) pass-through is higher for products with longer maturities, 3) EMU did not increase price competition, 4) bank behavior is consistent with the presence of menu costs, and 5) existing empirical evidence may underestimate adjustment speed. Furthermore, heterogeneous price setting among banks is driven by market power as well as the bank lending channel.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/261.

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Length: 64 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/261

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Keywords: pass-through; retail bank interest rates; heterogeneous panel cointegration; bank lending channel; asymmetry;

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