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

Abstract

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.

The impact of Covid-19 on student achievement: Evidence from a recent meta-analysis

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The transmission of euro area monetary policy to financially euroized countries

“…According to the meta study of Andries and Billon (2016), the magnitude of the long‐term pass‐through has been found to be stronger for lending rates compared with deposit rates. For corporate loans, the long‐run pass‐through of lending rates has been estimated to be close to unity by a number of studies and thus of a higher magnitude compared with household loans, particular consumer lending (Gregor et al, 2021). In the short run, the empirical evidence suggests that the pass‐through is incomplete, especially for household loans and deposits with short maturities.…”

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Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries

“…Other papers focus on European countries outside of the euro zone. 3 A meta-data study on interest rate pass-through, based on more than a thousand estimates from 50 studies, finds that the average pass-through from monetary policy rates to bank lending rates is around 0.8 (Gregor and Melecký, 2021).…”