Interest Rate Pass-through During the Global Financial Crisis: The Case of Sweden
A stable relationship between monetary policy rates and bank lending and deposit rates faced by consumers and companies is essential for the effective transmission of monetary policy decisions. This paper studies how changes in the policy rate set by the Swedish central bank, the Riksbank, have been transmitted to money market rates and, in turn, to retail rates before and during the financial turmoil that erupted in summer 2007. Historically, the Riksbank has been successful in effectively controlling money market rates, but during the financial turmoil the transmission of impulses from the policy rate to money market rates appears to have been weakened by elevated and volatile risk premia, although these increased less in Sweden than in the euro area, United Kingdom and United States. The pass-through from money market rates to retail rates is found to have been complete, but sluggish, before the turmoil. Pass-through was also faster into short-term loan rates for non-financial companies than for households. During the turmoil the pass-through from money market to lending rates has been preserved at short maturities, but not at longer maturities. Lack of access to long-term funding has likely played a role. Le canal de transmission des taux d'intÃ©rÃªt pendant la crise financiÃ¨re mondiale : le cas de la SuÃ¨de Lâ€™existence dâ€™une relation stable entre les taux dâ€™intÃ©rÃªt fixÃ©s par les autoritÃ©s monÃ©taires et les taux que les banques offrent aux mÃ©nages et aux entreprises est essentielle pour la transmission des dÃ©cisions de politique monÃ©taire. Cet article Ã©tudie comment les changements de taux dâ€™intÃ©rÃªt de la banque centrale de SuÃ¨de, la Riksbank, se rÃ©percutent sur les taux du marchÃ© monÃ©taire, puis sur les taux proposÃ©s par les institutions financiÃ¨res Ã leurs clients, avant et pendant la crise financiÃ¨re dÃ©marrant en 2007. Le contrÃ´le de la Riksbank sur les taux du marchÃ© monÃ©taire, fort au court des derniÃ¨res annÃ©es, apparaÃ®t affaibli par lâ€™importance et la volatilitÃ© des primes de risque depuis lâ€™Ã©tÃ© 2007, mÃªme si ces derniÃ¨res ont moins augmentÃ© en SuÃ¨de que dans dâ€™autres pays de lâ€™OCDE. La transmission des variations des taux du marchÃ© monÃ©taire aux taux offerts par les institutions financiÃ¨res semble avoir Ã©tÃ© complÃ¨te avant la crise, bien que lente. Elle Ã©tait aussi plus rapide pour les prÃªts de court terme aux entreprises non-financiÃ¨res que pour les prÃªts aux mÃ©nages. Pendant la crise, le canal de transmission des taux du marchÃ© monÃ©taire aux taux offerts par les institutions financiÃ¨res a Ã©tÃ© prÃ©servÃ© pour les courtes maturitÃ©s, mais affaibli pour les longues maturitÃ©s. Le manque dâ€™accÃ¨s Ã des financements de long terme a pu jouer un rÃ´le.
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