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Bank concentration and asymmetric interest rate spreads pass through: evidence from selected euro area countries

Author

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  • Zacharias Bragoudakis

    (Bank of Greece, Economic Analysis and Research Department)

  • Alexandros Tsioutsios

    (Department of Economics & UoA Center for Financial Studies, School of Economics and Political Sciences, National and Kapodistrian University of Athens.)

Abstract

The reaction of bank retail interest rates and deposit rates to shifts in interbank rates is influenced by the structural characteristics of the financial and banking system, as well as by the degree of competition within the banking sector. A recursive momentum threshold autoregressive asymmetric error correction model (Recursive MTAR-AECM) with non-linear adjustment is used to explore the existence of asymmetries in the adjustment of lending-deposits spreads to deviations in interbank rates for a group of selected euro countries. The findings provide evidence in favor of asymmetric adjustment in interest rate spreads and the asymmetric adjustment associated with the market power of banking sector concentration explanation of interest rate rigidity.

Suggested Citation

  • Zacharias Bragoudakis & Alexandros Tsioutsios, 2025. "Bank concentration and asymmetric interest rate spreads pass through: evidence from selected euro area countries," Working Papers 352, Bank of Greece.
    • Handle: RePEc:bog:wpaper:352
    DOI: 10.52903/wp2025352
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    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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