Multiple Breaks in Lending Rate Pass-Through: A Cross Country Study for the Euro Area

Political Economy Discussion Paper No. 524

31 Pages Posted: 1 Mar 2006

See all articles by Gianluca Di Lorenzo

Gianluca Di Lorenzo

Prometeia SpA

Giuseppe Marotta

Department of Economics Marco Biagi and CEFIN; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics

Date Written: February 2006

Abstract

A new approach is proposed for searching multiple unknown breaks, possibly associated with EMU, in the short term business lending rate pass-through. Multiple breaks are detected in five out of nine countries of the euro area. The last break occurs much before the start of EMU for France, several months after that event for Austria, Italy and Germany. Long run pass-throughs decrease (except for France) sizably below one (except for the Netherlands); heterogeneity in the monetary transmission increases across countries. These results raise doubts on claims of a more effective monetary policy under EMU.

Keywords: Interest rates, Monetary policy, Economic and Monetary Union, Cointegration analysis, Structural breaks

JEL Classification: E43, E52, E58, F36

Suggested Citation

Di Lorenzo, Gianluca and Marotta, Giuseppe, Multiple Breaks in Lending Rate Pass-Through: A Cross Country Study for the Euro Area (February 2006). Political Economy Discussion Paper No. 524, Available at SSRN: https://ssrn.com/abstract=886040 or http://dx.doi.org/10.2139/ssrn.886040

Gianluca Di Lorenzo (Contact Author)

Prometeia SpA ( email )

Via G. Marconi, 43
I-40122 Bologna
Italy

Giuseppe Marotta

Department of Economics Marco Biagi and CEFIN ( email )

via Berengario 51
Modena, modena I-41100
Italy

HOME PAGE: http://morgana.unimore.it/marotta_giuseppe/

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41121 Modena, Modena 41100
Italy
+39 59 205 6875 (Phone)
+39 59 205 6948 (Fax)

HOME PAGE: http://morgana.unimore.it/marotta_giuseppe/

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