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

Nikolay Hristov, Oliver Hülsewig and Timo Wollmershäuser

No 3964, CESifo Working Paper Series from CESifo

Abstract: 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.

Keywords: Euro Area; global financial crisis; interest rate pass-through; panel vector autoregressive model; sign restrictions; structural break; DSGE model (search for similar items in EconPapers)
JEL-codes: E40 E43 E52 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The interest rate pass-through in the Euro area during the global financial crisis (2014)
Working Paper: The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3964

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