The interest rate pass-through in the Euro area during the global financial crisis

Abstract

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Bank efficiency and interest rate pass-through: Evidence from Czech loan products

“…Hristov et al (2014), on the other hand, using fresher data, show that the pass-through has become significantly distorted in the euro area since 2008, which is consistent with our results for the same period and Czech data. Hansen & Welz (2011) examine Swedish data and report results in between those of Illes & Lombardi (2013) and Hristov et al (2014): in Sweden the crisis has not affected interest rate pass-through for products with short maturities, but has distorted pass-through to lending rates at longer maturities.…”

“…On the other hand, in the long-run the interest rate pass-through is typically found to be close to complete. The existing studies take into account various bank products, separating corporate loans from household loans (Hansen & Welz, 2011) and differentiating between the loan amount of corporate loans and between mortgages and consumer loans (Hristov et al, 2014). For example, studies like Rocha (2012), Belke et al (2013), and Aristei & Gallo (2014) find more complete long-run pass-through for corporate loans than for household loans.…”

“…Nevertheless, the empirical examinations of interest rate pass-through often produce different results depending on the country or time period under investigation, and hence recommendations cannot be easily carried from one examined country to another. The role of the late 2000s financial crisis on the pass-through mechanism is especially unclear, with some studies suggesting little change in transmission (Illes & Lombardi, 2013), some significant distortion in passthrough (Hristov et al, 2014), and some changes in transmission only for certain products (Hansen & Welz, 2011).…”

The pass-through of monetary policy rate to lending rates: The role of macro-financial factors

“…They find a weakening pass-through in the post GFC period that could be associated with the heightened uncertainty and perception of risk. Hristov et al (2014) analyze the interest rate pass-through in the Eurozone countries using panel VAR and DSGE models. They find that weaker pass-through in the aftermath of GFC is caused by higher distress of the banking sector.…”

Interest rate pass-through: a nonlinear vector error-correction approach

“…Not surprisingly, several studies (e.g. Karagiannis et al, 2014;Aristei and Gallo, 2014;Illes and Lombardi, 2013;Mora, 2014;Hristov et al, 2014) find evidence of a decline in pass-through across Europe and the US and associate it with changes in risk appetites, the size and structure of macroeconomic shocks, or funding uncertainty. In light of this evidence, an important question is whether this decline in pass-through is a global problem or one that is tied to areas that experienced the most severe turmoil.…”