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

Gregora, Jiri; Melecký, Martin

doi:10.1016/j.econmod.2018.03.003

Cited by 28 publications

(27 citation statements)

References 43 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Some researchers expand equation 1 by including a vector to control for macro-financial factors such as bank competition, credit risk, liquidity premium, or some other variables that can influence the strength of interest rate pass-through (for instance, Gambacorta et al, 2015;Gregor and Melecký, 2018).…”

Section: Theoretical Underpinnings Of the Empirical Literaturementioning

confidence: 99%

“…Some researchers also include interactive terms between the interest rate pass-through and the conditioning variables to make the overall pass-through dependent on macro-financial conditions (van Leuvensteijn et al, 2013;Gregor and Melecký, 2018):…”

Section: Theoretical Underpinnings Of the Empirical Literaturementioning

confidence: 99%

“…Some researchers also include interactive terms between the interest rate pass‐through and the conditioning variables to make the overall pass‐through dependent on macro‐financial conditions (van Leuvensteijn et al ., 2013; Gregor and Melecký, 2018):

B a n k l e n d i n g r a t e_{t} = a + b \cdot r e f e r e n c e r a t e_{t} + c \cdot X_{t} + d \cdot r e f e r e n c e r a t e_{t} \cdot X_{t} + e_{t}

where the overall interest rate pass‐through conditioned on bank macro financial factors can be calculated as

b + d \cdot \bar{X}

. In this computation,

\overset{X}{true}

represents the sample mean of the significant conditional variables.…”

Section: Empirical Specifications Used In the Literaturementioning

confidence: 99%

“…(2013) and Leroy and Luccote (2015a) control for bank competition using the aggregate Boone and the Lerner indices, respectively, both as a stand‐alone control and in an interaction with the money market rate (see Equation ). Studies also control for market expectation of future interest rates, including the spread between the government bond yield and the money market rate (Cifarelli and Paladino, 2016; Gregor and Melecký, 2018), the forecast of the money market rate (Banerjee et al ., 2013) and the Volatility Index (VIX), which reflects the expectation of the market's volatility over the next 30 days (Grigoli and Mota, 2017).…”

Section: Empirical Specifications Used In the Literaturementioning

confidence: 99%

See 3 more Smart Citations

Interest Rate Pass‐through: A Meta‐analysis of the Literature

Gregora

Melecky

Melecký

2020

Journal of Economic Surveys

Self Cite

View full text Add to dashboard Cite

The interest rate pass‐through describes how changes in a reference rate (the monetary policy, money market or T‐bill rate) transmit to bank lending rates. We review the empirical literature on the interest rate pass‐through and systematize it by means of meta‐analysis and meta‐regressions. Using the pass‐through to corporate lending rates as the baseline, we find systematically lower estimated pass‐through coefficients in studies that focus on the pass‐through to consumer lending rates and rates on long‐term loans. Also studies estimating the pass‐through by averaging all lending rates into one category report a lower pass‐through. Importantly, the interest rate pass‐through is significantly influenced by the country's macro‐financial environment. In economies with deepening stock markets, the estimated pass‐through strengthens significantly. Interestingly, after the global financial crisis, the pass‐through weakened across the board, including because of growing trade openness and supply chain financing, rising volatility and stock market turnovers, as well as declining central bank independence. Inflation targeting frameworks, if in place, helped diminish this pass‐through weakening.

show abstract

Section: Theoretical Underpinnings Of the Empirical Literaturementioning

confidence: 99%

Section: Theoretical Underpinnings Of the Empirical Literaturementioning

confidence: 99%

B a n k l e n d i n g r a t e_{t} = a + b \cdot r e f e r e n c e r a t e_{t} + c \cdot X_{t} + d \cdot r e f e r e n c e r a t e_{t} \cdot X_{t} + e_{t}

where the overall interest rate pass‐through conditioned on bank macro financial factors can be calculated as

b + d \cdot \bar{X}

. In this computation,

\overset{X}{true}

represents the sample mean of the significant conditional variables.…”

Section: Empirical Specifications Used In the Literaturementioning

confidence: 99%

Section: Empirical Specifications Used In the Literaturementioning

confidence: 99%

See 2 more Smart Citations

Interest Rate Pass‐through: A Meta‐analysis of the Literature

Gregora

Melecky

Melecký

2020

Journal of Economic Surveys

Self Cite

View full text Add to dashboard Cite

show abstract

“…Mandel and Tomšík (2014) examined whether changes in the CNB policy rate had the intended impact on the bank lending and interest rate channel, and they confi rmed the effi ciency of the monetary policy even in the conditions of excess liquidity in the Czech banking system. Gregor and Melecký (2018) claim to be the fi rst to test the effi ciency of the pass-through in the Czech Republic during the period of zerolevel rates and to test the impact of an unconventional monetary policy tool in the form of FX interventions. Their study represents a policy rate approach with further explanatory factors, which are added to the model to tame the time-varying product mark-ups.…”

Section: Literature Reviewmentioning

confidence: 99%

Cross-Currency Basis Spread and Its Impact on Corporate Lending Rates in the Czech Banking Sector

Staniek¹

2020

Prague Economic Papers

View full text Add to dashboard Cite

For successful monetary policy implementation, it is crucial to know the pricing behaviour of banks and the determinants of banks' lending rates. With the onset of the global financial crisis, markets in unsecured lending ceased to provide a reliable level of market costs, while markets in cross-currency products gained significance. The aim of this research is to gauge the extent to which the EUR-CZK cross-currency basis spread is reflected in the corporate lending rates provided by Czech banks. We discovered that just over 50% of the changes in the basis pass through to the lending rates. The greater part of this passthrough can be identified in EUR lending rates, which are, as a result, higher. In the case of CZK, the negative basis should tend to decrease the lending rates. However, the impact is fairly limited, and we were not able to confirm any significant long-run relationship.

show abstract

Does capital-based regulation affect bank pricing policy?

2022

View full text Add to dashboard Cite

This paper tests whether a series of changes to capital requirements transmitted to a change to banks’ pricing policy. We compile a rich bank-level supervisory dataset covering the banking sector in the Czech Republic over the period 2004–2019. We estimate that the changes to the overall capital requirements did not force banks to alter their pricing policy. The impact on bank interest margins and loan rates is found to lie in a narrow range around zero irrespective of loan category. Our estimates allow us to rule out effects even for less-capitalised banks and small banks. The results obtained contradict estimates from other studies reporting significant transmission of capital regulation to lending rates and interest margins. We therefore engage in a deeper discussion of why this might be the case. Our estimates may be used in the ongoing discussion of the benefits and costs of capital-based regulation in banking. Supplementary Information The online version contains supplementary material available at 10.1007/s11149-022-09448-5.

show abstract

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

Cited by 28 publications

References 43 publications

Interest Rate Pass‐through: A Meta‐analysis of the Literature

Interest Rate Pass‐through: A Meta‐analysis of the Literature

Cross-Currency Basis Spread and Its Impact on Corporate Lending Rates in the Czech Banking Sector

Does capital-based regulation affect bank pricing policy?

Contact Info

Product

Resources

About