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Interest rate pass-through in the EMU – new evidence using the nonlinear ARDL framework

Author

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  • Florian Verheyen

    (Department of Economics, University of Duisburg-Essen)

Abstract

This investigation puts the interest rate pass-through mechanism from policy to deposit rates in the EMU under closer scrutiny. By using the newly developed nonlinear ARDL framework of Shin et al. (2011), we are able to estimate asymmetric long-run as well as short-run coefficients. Previous studies usually assume symmetric long-run behaviour which is too restrictive according to our results. Based on fully harmonized data for three EMU countries and the EMU as a whole we disentangle short-run and long-run asymmetries as well as heterogeneity in the interest rate pass-through mechanism across EMU. Our results point to considerable asymmetries especially with regard to the long-run pass-through of money market rate changes as well as some heterogeneity between countries.

Suggested Citation

  • Florian Verheyen, 2013. "Interest rate pass-through in the EMU – new evidence using the nonlinear ARDL framework," Economics Bulletin, AccessEcon, vol. 33(1), pages 729-739.
    • Handle: RePEc:ebl:ecbull:eb-12-00529
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    More about this item

    Keywords

    interest rate pass-through; EMU; cointegration; nonlinearity;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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