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Base rate pass-through: evidence from banks' and building societies' retail rates

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  • Paul Mizen
  • Boris Hofmann

Abstract

Official interest rate changes are intended to influence short rates on money market instruments and retail products, such as deposit accounts and mortgages, and complete pass-through is often simply taken for granted. In this paper a theoretical and econometric framework for assessing the evidence for this assumption is provided, using 14 years of monthly data for interest rates on deposit and mortgage products offered by UK banks and building societies. The method employed allows for asymmetries and non-linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived 'gap' between retail and base rates is widening or narrowing.

Suggested Citation

  • Paul Mizen & Boris Hofmann, 2002. "Base rate pass-through: evidence from banks' and building societies' retail rates," Bank of England working papers 170, Bank of England.
    • Handle: RePEc:boe:boeewp:170
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2002/wp170.pdf
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    Cited by:

    1. Chmielewski, Tomasz, 2003. "Interest rate pass-through in the Polish banking sector and bank-specific financial disturbances," MPRA Paper 5133, University Library of Munich, Germany, revised 31 Jan 2004.
    2. Karlo Kauko, 2005. "Bank interest rates in a small European economy: Some exploratory macro level analyses using Finnish data," Finance 0508020, University Library of Munich, Germany.
    3. Solange Berstein & Rodrigo Fuentes, 2005. "Concentration and Price Rigidity: Evidence for the Deposit Market in Chile," Money Affairs, CEMLA, vol. 0(1), pages 1-22, January-J.
    4. Ximena Chavarro-Sanchez & Deicy Cristiano-Botia & Jose E. Gomez-Gonzalez & Eliana González-Molano & Carlos Huertas-Campos, 2015. "Evaluación de la transmisión de la tasa de interés de referencia a las tasas de interés del sistema financiero," Borradores de Economia 874, Banco de la Republica de Colombia.
    5. Jamilov, Rustam & Égert, Balázs, 2014. "Interest rate pass-through and monetary policy asymmetry: A journey into the Caucasian black box," Journal of Asian Economics, Elsevier, vol. 31, pages 57-70.
    6. Sebastian Barnes & Gregory Thwaites, 2005. "'Real-world' mortgages, consumption volatility and the low inflation environment," Bank of England working papers 273, Bank of England.
    7. G. C. Lim & Sarantis Tsiaplias & Chew Lian Chua, 2013. "Bank and Official Interest Rates: How Do They Interact over Time?," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 160-174, June.
    8. Mr. Ananthakrishnan Prasad & Mr. Raphael A Espinoza, 2012. "Monetary Policy Transmission in the GCC Countries," IMF Working Papers 2012/132, International Monetary Fund.
    9. repec:zbw:bofrdp:2005_009 is not listed on IDEAS
    10. Jes??s Crespo-Cuaresma & Bal??zs ??gert & Thomas Reininger, 2004. "Interest Rate Pass-Through in New EU Member States: The Case of the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 2004-671, William Davidson Institute at the University of Michigan.
    11. Boris Hofmann, 2003. "Bank Lending and Property Prices: Some International Evidence," Working Papers 222003, Hong Kong Institute for Monetary Research.

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