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An empirical analysis of national differences in the retail bank interest rates of the euro area

  • Massimiliano Affinito

    ()

    (Banca d'Italia)

  • Fabio Farabullini

    ()

    (Banca d'Italia)

Registered author(s):

    The availability of new harmonized data on bank interest rates allows a rigorous assessment to be made of cross-country price homogeneity/heterogeneity in euro area retail credit markets. Econometric analysis shows that the banking market is still highly segmented and that the degree of integration in a single country (Italy, taken as a benchmark for integration) is greater than in the euro area. However, national differences can be partially explained by variables reflecting the characteristics of domestic depositors and borrowers (�demand side� regressors, such as risk exposure, disposable income, alternative financing sources, average firm size) and the characteristics of the banking systems (�supply side� regressors, such as banking market concentration, asset and liability structure). The euro area prices appear different because national banking products appear different or because they are differentiated by national factors. Once these factors have been controlled for, many differences disappear.

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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2006/2006-0589/tema_589.pdf
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    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 589.

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    Date of creation: May 2006
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    Handle: RePEc:bdi:wptemi:td_589_06
    Contact details of provider: Postal: Via Nazionale, 91 - 00184 Roma
    Web page: http://www.bancaditalia.it

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