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Beyond the interest rate pass-through: monetary policy and banks interest rates since the effective lower bound

Author

Listed:
  • Christophe Blot

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Fabien Labondance

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

We investigate whether ECB monetary policy influences the retail interest rates in the Euro Area when the policy rate reaches the effective lower bound. We estimate a panel Error Correction Model that accounts for potential heterogeneities in the transmission of monetary policy. The analysis disentangles alternative balance-sheet policies implemented by the ECB. We find that unconventional measures have influenced banking interest rates beyond the pass-through of the current and expected policy rate. These effects are driven by liquidity provisions and by the covered bond purchase programmes. Those policies have been effective in the core and in the peripheral countries; however, the effect of purchases of covered-bond has been stronger in the periphery.

Suggested Citation

  • Christophe Blot & Fabien Labondance, 2022. "Beyond the interest rate pass-through: monetary policy and banks interest rates since the effective lower bound," Post-Print hal-03970444, HAL.
    • Handle: RePEc:hal:journl:hal-03970444
    DOI: 10.1080/00036846.2022.2056126
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    Cited by:

    1. Kyriaki G. LouKa & Nektarios A. Michail, 2023. "The pass through of monetary policy to euro area bank interest rates," Working Papers 2023-2, Central Bank of Cyprus.
    2. Egan, Paul & McQuinn, Kieran, 2023. "Monetary tightening in the Euro Area: Implications for residential investment," Papers WP767, Economic and Social Research Institute (ESRI).

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