The dynamics of bank spreads and financial structure
This paper investigates the dynamics of the pass-through between market interest rates and bank interest rates in the euro area as a function of cyclical and structural differences in the financial system. We find that overall the speed of adjustment for loans is significantly faster than for deposits, and that the pass-through is especially sluggish for demand deposits and savings deposits. Bank soundness, credit risk and interest rate risk are found to exert a significant influence on the speed of pass through. We also find evidence of faster (slower) pass-through for loans (deposits) if the change in monetary policy was up (down). Overall, we find that competition among banks and competition from financial markets result in a faster bank interest rate pass-through. Finally, we find some evidence that financial innovation speeds up the pass-through for those market segments that are most directly affected by these innovations. JEL Classification: E43, G21
|Date of creation:||Jan 2007|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20070714. 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: (Official Publications)
If references are entirely missing, you can add them using this form.