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The Evolution of Loan Rate Stickiness Across the Euro Area

  • Jouchi Nakajima

    (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: jouchi.nakajima-1 @boj.or.jp))

  • Yuki Teranishi

    (Associate Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: yuuki.teranishi @boj.or.jp))

To investigate the banking sector integration across euro area countries in terms of loan interest rate stickiness, we estimate structural loan rate curves for 12 euro area countries using time-varying regressions with stochastic volatility. Our results show that the loan rates are sticky to a policy interest rate in all countries for all loan maturities, the degree of stickiness differs across the countries, and the degree of difference is more prominent for longer loan maturities. For short-term loans, the loan rate stickiness decreases and for intermediate- and long-term loans the loan rate stickiness converge to average levels during the sample periods. Banking integration in the euro area is not yet complete, but the degree of heterogeneity in the loan rate stickiness decreases.

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Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-10.

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Date of creation: Mar 2009
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Handle: RePEc:ime:imedps:09-e-10
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