IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis

  • Wollmershäuser, Timo
  • Hristov, Nikolay
  • Hülsewig, Oliver

This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro area banks to the global financial crisis. We focus on their interest rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding is that the pass through from changes in the money market rate to retail bank rates became significantly less complete during the crisis. Model simulations show that this result can be well explained by a significant increase in the frictions that the banks business is subject to.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econstor.eu/bitstream/10419/79976/1/VfS_2013_pid_859.pdf
Download Restriction: no

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79976.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:79976
Contact details of provider: Web page: http://www.socialpolitik.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fabio Canova & Gianni De Nicolo, 2000. "Monetary disturbances matter for business fluctuations in the G-7," International Finance Discussion Papers 660, Board of Governors of the Federal Reserve System (U.S.).
  2. Aristei, David & Gallo, Manuela, 2014. "Interest rate pass-through in the Euro area during the financial crisis: A multivariate regime-switching approach," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 273-295.
  3. Gali, Jordi & Lopez-Salido, J. David & Valles, Javier, 2003. "Technology shocks and monetary policy: assessing the Fed's performance," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 723-743, May.
  4. Michiel van Leuvensteijn & C. Kok Sorensen & J.A. Bikker & A.A.R.J.M. Rixtel, 2008. "Impact of bank competition on the interest rate pass-through in the euro area," CPB Discussion Paper 103, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Gert Peersman, 2005. "What caused the early millennium slowdown? Evidence based on vector autoregressions," Bank of England working papers 272, Bank of England.
  6. Goddard, John & Molyneux, Philip & Wilson, John O.S. & Tavakoli, Manouche, 2007. "European banking: An overview," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 1911-1935, July.
  7. Kok, Christoffer & Werner, Thomas, 2006. "Bank interest rate pass-through in the euro area: a cross country comparison," Working Paper Series 0580, European Central Bank.
  8. James H. Stock & Mark W. Watson, 2005. "Understanding Changes In International Business Cycle Dynamics," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 968-1006, 09.
  9. Angeliki Kourelis & Carlo Cottarelli, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Working Papers 94/39, International Monetary Fund.
  10. Ciccarelli, Matteo & Peydró, José-Luis & Maddaloni, Angela, 2010. "Trusting the bankers: a new look at the credit channel of monetary policy," Working Paper Series 1228, European Central Bank.
  11. Linda A. Toolsema & Jan-Egbert Sturm & Jakob de Haan, 2001. "Convergence of Monetary Transmission in EMU New Evidence," CESifo Working Paper Series 465, CESifo Group Munich.
  12. Born, Benjamin & Juessen, Falko & Müller, Gernot J., 2013. "Exchange rate regimes and fiscal multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 446-465.
  13. Gianni De Nicolò & Marcella Lucchetta, 2011. "Systemic Risks and the Macroeconomy," NBER Chapters, in: Quantifying Systemic Risk, pages 113-148 National Bureau of Economic Research, Inc.
  14. Hristov, Nikolay & Hülsewig, Oliver & Wollmershäuser, Timo, 2012. "Loan supply shocks during the financial crisis: Evidence for the Euro area," Journal of International Money and Finance, Elsevier, vol. 31(3), pages 569-592.
  15. Belke, Ansgar & Beckmann, Joscha & Verheyen, Florian, 2013. "Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 1-24.
  16. Kwapil, Claudia & Scharler, Johann, 2010. "Interest rate pass-through, monetary policy rules and macroeconomic stability," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 236-251, March.
  17. Gabe J. de Bondt, 2005. "Interest Rate Pass-Through: Empirical Results for the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 6(1), pages 37-78, 02.
  18. K. Farrant & G. Peersman, 2005. "Is the exchange rate a shock absorber or a source of shocks? New empirical evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/285, Ghent University, Faculty of Economics and Business Administration.
  19. Robert KOLLMANN, 2011. "Global Banking and International Business Cycles," 2011 Meeting Papers 20, Society for Economic Dynamics.
  20. Rebucci, Alessandro, 2010. "Estimating VARs with long stationary heterogeneous panels: A comparison of the fixed effect and the mean group estimators," Economic Modelling, Elsevier, vol. 27(5), pages 1183-1198, September.
  21. repec:clu:wpaper:0910-01 is not listed on IDEAS
  22. Niels-Jakob Harbo Hansen & Peter Welz, 2011. "Interest Rate Pass-through During the Global Financial Crisis: The Case of Sweden," OECD Economics Department Working Papers 855, OECD Publishing.
  23. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  24. Sinn, Hans-Werner, 2012. "Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now," OUP Catalogue, Oxford University Press, number 9780199659883, July.
  25. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, 09.
  26. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
  27. Vasco Cúrdia & Michael Woodford, 2009. "Credit spreads and monetary policy," Staff Reports 385, Federal Reserve Bank of New York.
  28. Tillmann, Peter, 2012. "Capital inflows and asset prices: Evidence from emerging Asia," IMFS Working Paper Series 58, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  29. Roland Straub & Gert Peersman, 2006. "Putting the New Keynesian Model to a Test," IMF Working Papers 06/135, International Monetary Fund.
  30. Fratzscher, Marcel & Saborowski, Christian & Straub, Roland, 2010. "Monetary Policy Shocks and Portfolio Choice," CEPR Discussion Papers 8099, C.E.P.R. Discussion Papers.
  31. Thomas Helbling & M. Ayhan Kose & Christopher Otrok & Raju Huidrom, 2010. "Do Credit Shocks Matter? A Global Perspective," IMF Working Papers 10/261, International Monetary Fund.
  32. Aliaga-Díaz, Roger & Olivero, María Pía, 2010. "Is there a financial accelerator in US banking?: Evidence from the cyclicality of banks' price-cost margins," Economics Letters, Elsevier, vol. 108(2), pages 167-171, August.
  33. Robert Kollmann, 2010. "Banks and International Business Cycles," 2010 Meeting Papers 1058, Society for Economic Dynamics.
  34. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  35. Karagiannis, Stelios & Panagopoulos, Yannis & Vlamis, Prodromos, 2010. "Interest rate pass-through in Europe and the US: Monetary policy after the financial crisis," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 323-338, May.
  36. Fabio Canova and Matthias Paustian, 2010. "Measurement with Some Theory: a New Approach to Evaluate Business Cycle Models (with appendices)," Working Papers 511, Barcelona Graduate School of Economics.
  37. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
  38. Eickmeier, Sandra & Hofmann, Boris & Worms, Andreas, 2006. "Macroeconomic fluctuations and bank lending: evidence for Germany and the euro area," Discussion Paper Series 1: Economic Studies 2006,34, Deutsche Bundesbank, Research Centre.
  39. Almuth Scholl & Harald Uhlig, 2005. "New Evidence on the Puzzles. Results from Agnostic Identification on Monetary Policy and Exchange Rates," SFB 649 Discussion Papers SFB649DP2005-037, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  40. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  41. Sander, Harald & Kleimeier, Stefanie, 2004. "Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 461-492, April.
  42. Stefano Neri, 2013. "The impact of the sovereign debt crisis on bank lending rates in the euro area," Questioni di Economia e Finanza (Occasional Papers) 170, Bank of Italy, Economic Research and International Relations Area.
  43. Kleimeier, Stefanie & Sander, Harald, 2006. "Expected versus unexpected monetary policy impulses and interest rate pass-through in euro-zone retail banking markets," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 1839-1870, July.
  44. Carlo Cottarelli & Angeliki Kourelis, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 587-623, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79976. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.