IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Central bank rates, market rates and retail bank rates in the euro area in the context of the recent crisis

  • N. Cordemans

    (National Bank of Belgium, Research Department)

  • M. de Sola Perea

    (National Bank of Belgium, Research Department)

Registered author(s):

    The article addresses recent trends in the financing costs of various public and private sectors in the euro area and Belgium. It pays particular attention to the monetary policy transmission process via the interest rate channel during the crisis and notably examines the extent to which the process was affected by tensions on sovereign debt markets. Overall, it appears that the interest rate cuts orchestrated by the ECB and the adoption of numerous non-standard monetary policy measures made it possible to maintain an effective transmission of monetary policy in the euro area during the crisis. Public debt market tension has had some impact on market borrowing costs for non-financial corporations, but this impact was relatively limited at the aggregate level. Because of its direct involvement in public sector financing, the financial sector was significantly affected, and while a portion of the impact was passed on in the rates offered to households and the non-financial private sector, it appears that banks’ transmission of monetary policy was not profoundly affected in the euro area overall. Similar conclusions apply to Belgium, where it does however appear that mortgage loan rates were somewhat influenced by the rise in sovereign debt yields. In the countries bearing the brunt of the crisis, companies and individuals nevertheless saw their borrowing costs rise more significantly. In general, it appears that at the national level, private sector financing costs were amply influenced by those of the public sector, although some decoupling was observed, basically at the level of the non-financial sector. These results are reassuring in that they demonstrate the relative effectiveness of the monetary policy measures adopted during the crisis and the relatively limited repercussions of the sovereign debt crisis on the rest of the euro area economy. Still, in the countries most affected by the crisis, the private sector has been hit hard by higher public sector financing costs and fiscal consolidation measures in those countries should therefore remain a top priority.

    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.

    File URL: https://www.nbb.be/doc/oc/repec/ecrart/ecorevi2011_h2.pdf
    Download Restriction: no

    Article provided by National Bank of Belgium in its journal Economic Review.

    Volume (Year): (2011)
    Issue (Month): i (June)
    Pages: 27-52

    as
    in new window

    Handle: RePEc:nbb:ecrart:y:2011:m:june:i:i:p:27-52
    Contact details of provider: Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
    Phone: (+ 32) (0) 2 221 25 34
    Fax: (+ 32) (0) 2 221 31 62
    Web page: https://www.nbb.be/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbb:ecrart:y:2011:m:june:i:i:p:27-52. 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: ()

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.