Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away?
27 Pages Posted: 27 Dec 2007
Date Written: November 2006
Abstract
In this study, we seek to better understand the interest rate pass-through in five Central and Eastern European countries - the Czech Republic, Hungary, Poland, Slovakia and Slovenia, the CEE-5. Our pass-through estimates for several retail rates are generally lower than those reported in the literature, given the absence of cointegration between policy rates and long- or even short-term market rates. In addition, the pass-through has been declining over time in the CEE-5, and we argue that it is likely to decrease further in the future. Finally, the pass-through appears similar in the CEE-5 than in Spain and is higher than in core euro area countries. Hence, euro adoption by the CEE-5 would not further increase heterogeneity within the euro area with regard to the interest rate passthrough. However, substantially more research is needed to establish commonalities and differences between the CEE-5 and the euro area with respect to the reaction of prices and output to monetary policy action.
Keywords: interest rate pass-through, monetary transmission
JEL Classification: E43, E50, E52, C22, G21, O52
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Bank Concentration and Retail Interest Rates
By Sandrine Corvoisier and Reint Gropp
-
Financial Structure and the Interest Rate Channel of ECB Monetary Policy
By Benoit Mojon
-
Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy
-
The Response of Short-Term Bank Lending Rates to Policy Rates: A Cross-Country Perspective
By Claudio E. V. Borio and Wilhelm Fritz
-
By Harald Sander and Stefanie Kleimeier
-
Bank Lending Rates and Financial Structure in Italy: A Case Study
By Carlo Cottarelli, Giovanni Ferri, ...
-
Retail Bank Interest Rate Pass-Through: New Evidence at the Euro Area Level
-
The Pass-Through from Market Interest Rates to Bank Lending Rates in Germany