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What Drives the Distributional Dynamics of Client Interest Rates on Consumer Loans in the Czech Republic?

Author

Listed:
  • Václav Brož

    (Institute of Economic Studies, Charles University, Prague, Czech Republic
    Czech National Bank, Prague, Czech Republic)

  • Michal Hlavácek

    (Institute of Economic Studies, Charles University, Prague, Czech Republic)

Abstract

We study determinants of the bank-level distributional dynamics of client interest rates on consumer loans in the Czech Republic in the recent period 2014–2019 when banks started to provide new consumer loans at very low interest rates. We build on the relevant literature in terms of the selected explanatory variables as well as the methodological approach and use regulatory data that enable us to work with the mean, median and the mode of the distribution of client interest rates on consumer loans. We show that development of the market rate, the NPL ratio as well as the unemployment rate facilitated the observed distributional dynamics. Further, using a variety of variables on market competition/market concentration, our analysis reveals that the role of this determinant is limited at best. Our results, especially regarding the pass through from market rates to consumer loan rates, are mostly in line with the international literature but are novel in the Czech context.

Suggested Citation

  • Václav Brož & Michal Hlavácek, 2019. "What Drives the Distributional Dynamics of Client Interest Rates on Consumer Loans in the Czech Republic?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(3), pages 275-297, June.
  • Handle: RePEc:fau:fauart:v:69:y:2019:i:3:p:275-297
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    File URL: http://journal.fsv.cuni.cz/storage/1438_175_197_broz_final_issue_3_2019.pdf
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    Cited by:

    1. Dominika Ehrenbergerová & Martin Hodula & Zuzana Gric, 2022. "Does capital-based regulation affect bank pricing policy?," Journal of Regulatory Economics, Springer, vol. 61(2), pages 135-167, April.

    More about this item

    Keywords

    banks; client interest rates; consumer loans; market concentration; pass-through;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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