The Interest Rate Pass-Through in German Banking Groups
The pass-through of market rates to retail interest rates is generally found to be particularly slow in Germany compared to other countries. One popular explanation is the organisation of the banking system in three strictly segregated “pillars”: savings banks, credit cooperatives and private banks, and the low competitiveness of the first two of them. In this paper we analyse the differences of the interest rate pass-through between these banking groups. We employ a dataset covering (roughly) 30 banks’ retail interest rates of four standard banking products (mortgages, consumer credit, savings accounts and time deposits). In a panel ECM we first estimate reference models of the interest pass-through for the four products. In a second step they are augmented by dummies representing the respective banking group. We find remarkable differences in the interest rate pass-through: in general it is the big banks and savings banks reacting significantly quicker to changes in the market than regional banks and credit cooperatives. Hence, in contrast to the “common knowledge” of sluggish reactions of state banks, the savings banks take full part in competition. The credit cooperatives however, smoothing their retail rates, shield their customers from interest rate change risks.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 226 (2006)
Issue (Month): 4 (August)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/jbnst|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hempell, Hannah S., 2002. "Testing for Competition Among German Banks," Discussion Paper Series 1: Economic Studies 2002,04, Deutsche Bundesbank, Research Centre.
- Andreas Worms, 2003. "Interbank Relationships and the Credit Channel in Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(2), pages 179-198, June.
- Nehls, Hiltrud, 2006. "Der Zins-Pass-Through deutscher Geschäftsbankengruppen," RWI Schriften, RWI - Leibniz-Institut für Wirtschaftsforschung, volume 78, number 78.
- Peter Winker, 1999. "Sluggish adjustment of interest rates and credit rationing: an application of unit root testing and error correction modelling," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 267-277.
- Claudio E. V. Borio & Wilhelm Fritz, 1995. "The response of short-term bank lending rates to policy rates: a cross-country perspective," BIS Working Papers 27, Bank for International Settlements.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Heinemann, Friedrich & Schüler, Martin, 2002. "Integration benefits on EU retail credit markets: evidence from interest rate pass-through," ZEW Discussion Papers 02-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:226:y:2006:i:4:p:463-479. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.