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The Evolution of Loan Rate Stickiness Across the Euro Area

Author

Listed:
  • 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))

Abstract

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.

Suggested Citation

  • Jouchi Nakajima & Yuki Teranishi, 2009. "The Evolution of Loan Rate Stickiness Across the Euro Area," IMES Discussion Paper Series 09-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:09-e-10
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    File URL: http://www.imes.boj.or.jp/research/papers/english/09-E-10.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jouchi Nakajima, 2011. "Time-Varying Parameter VAR Model with Stochastic Volatility: An Overview of Methodology and Empirical Applications," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 107-142, November.
    2. Sohrab Rafiq, 2015. "How Important are Debt and Growth Expectations for Interest Rates?," IMF Working Papers 15/94, International Monetary Fund.

    More about this item

    Keywords

    banking integration; sticky loan interest rate; Bayesian analysis; time-varying regression; Markov chain Monte Carlo;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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