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Interest Rate Transmission to Commercial Credit Rates in Austria

Listed author(s):
  • Johann Burgstaller

The transmission process from policy-controlled interest rates to bank lending rates deserves reconsideration owing to the implementation of the European Monetary Union (EMU) in 1999. Additional attention to the subject in Austria is due to several large banks which, in 2002, have been charged for not passing on interest rate decreases to their customers. I examine dynamic responses of commercial credit rates to changes in key policy rates and money market rates. Using Austrian data from 1995 to 2002, I show that strength and speed of interest rate transmission depend on whether rates go up or down. With the EMU, asymmetry in interest rate transmission partly declined. The speed of transmission and the relative importance of policy and money market rates for commercial credit rates also were affected.

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File URL: http://www.econ.jku.at/papers/2003/wp0306.pdf
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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2003-06.

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Date of creation: May 2003
Handle: RePEc:jku:econwp:2003_06
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Web page: http://www.econ.jku.at/

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  2. Weth, Mark A., 2002. "The pass-through from market interest rates to bank lending rates in Germany," Discussion Paper Series 1: Economic Studies 2002,11, Deutsche Bundesbank, Research Centre.
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  8. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
  9. Marie Donnay & Hans Degryse, 2001. "Bank Lending Rate Pass-Through and Differences in the Transmission of a Single EMU Monetary Policy," Working Papers Department of Economics ces0117, KU Leuven, Faculty of Economics and Business, Department of Economics.
  10. Claudio E. V. Borio & Wilhelm Fritz, 1995. "The response of short-term bank lending rates to policy rates: a cross-country perspective," BIS Working Papers 27, Bank for International Settlements.
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  12. de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 0136, European Central Bank.
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