Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data

Belke, Ansgar; Beckmann, Joscha; Verheyen, Florian

doi:10.1016/j.jimonfin.2013.05.006

Cited by 71 publications

(8 citation statements)

References 28 publications

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“…where y (τ) is perceived as yield of the bond with maturity τ, β 1 represents the parameter L, β 2 is S, β 3 captures C1, β 4 expresses C2, and parameters λ 1 and λ 2 are characterized as the rate of exponential decay. Other additional QE impacts on goods and services markets, financial markets, and the labor market were determined on the basis of [32], respectively an extension to determine the impact of QE on changes in other financial indicators based on [33,34]. A vector error correction model (VECM) considering co-integrated variables was used to determine this effect.…”

Section: Methodsmentioning

confidence: 99%

The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries

et al. 2020

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One of the responses of the monetary policies of central banks to the sustainable development on financial markets, which also affected other markets and economic growth, is the role of non-standard monetary policies, referred to as quantitative easing in the form of Asset Purchase Programme. In this paper, the following main research problem was addressed: How can the Asset Purchase Programme help the European Central Bank fulfill its mandate of supervising the financial stability and financial development? Based on this, we formulated the main objective: to identify the impact of monetary policies on the dynamics of financial markets development, labor markets, and the markets for goods and services. As part of the applied methodology, the impact of the quantitative easing on the government bond yields curve was based on an indirect assessment using the seemingly unrelated regression model, considering the use of parameters from the functional benchmark form. Through the vector error correction model, another additional impact of the application of the monetary policy mechanisms on selected indicators of the considered markets was identified. The relationship between financial markets and economic growth was determined on the basis of the two-stage least square model using endogeneity control instruments. Applying the changes identified by the above models allowed us to determine the expected change in the rate of growth of the aggregate output of the euro area countries. Based on our results, we found out that Asset Purchase Programme had an impact on the growth of government bond yields issued by euro area countries, on lowering the risk rate on corporate bond markets, and increasing the nominal value of shares. In addition, growth in inflation and a decline in interest rates were affected. Finally, the European Central Bank (ECB)’s non-standard monetary policies have positively affected and stimulated the labor market and development in goods and services markets, referred to the sustainable financial development.

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Section: Methodsmentioning

confidence: 99%

The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries

et al. 2020

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“…Hristov et al (2014) find that the interest rate pass-through to retail banks margins has been hampered after the crisis and attribute the widening of the spreads across euro-area countries to the different structures of these economies. Furthermore, Belke, Beckmann, and Verheyen (2013) highlight that heterogeneities in the interest rate passthrough already existed both across different interest rates and across member-states even before the crisis. Aristei and Gallo (2014) give further support to the heterogeneity of monetary policy transmission, while rates on loans to NFCs are found to be more affected by changes in the short-term rates.…”

Section: Monetary Policy Transmission and Ecb's Non-standard Measuresmentioning

confidence: 92%

Bank lending margins in the euro area: Funding conditions, fragmentation and ECB's policies

Louri

Migiakis

2019

Rev Financ Econ

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In this paper we study the determinants of lending margins paid by euro‐area corporates for their bank loans. Across two separate groups of countries (distressed and non‐distressed) we examine whether lending margins have been affected by structural changes in the banking sector, the credit and liquidity position of banks and the costs of funding in the corporate and sovereign bond markets. The role of ECB policies with respect to narrowing down the fragmentation in the bank lending channel is also investigated through a structural panel VAR model for the period 2003:1 to 2014:12.

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“…Becker et al (2012) assume a weak exogeneity of the policy rate to the market rate that is exogenous to the loan rate and use the nonlinear threshold error correction model (NTECM) for the UK to explore an asymmetry depending on the level of policy rate. Belke et al (2013) utilize the NECM model and attain heterogeneous results for European countries. Doojav and Kalirajan (2016) explore a long-run pass-through of the policy rate on the lending rate and the deposit rate, and asymmetric linkage by the nonlinear autoregressive distributed lag (NARDL) model for Mongolia.…”

Section: Literature Reviewmentioning

confidence: 99%

Loom of Symmetric Pass-Through

Şahin

2019

Economies

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This paper analyzes the effects of the real policy interest rate on the banking sector lending rate, the deposit rate, real stock prices, and the real exchange rate using the Engle Granger cointegration method (EG), the vector error-correction model (VECM), and the nonlinear vector error-correction model (NVECM) with monthly Turkish data over the period January 2002–April 2018. (1) EG results indicate bivariate cointegration relationships between the real interest rate, lending rates, and the deposit rate. The real interest rate increases all lending rates, mainly the housing rate. However, the long-run coefficient for the real exchange rate is not statistically significant. The pass-through is higher for the deposit rate than for lending rates. Moreoever, real stock prices shrink substantially where the finance sector has been affected the most. (2) VECM results indicate a cointegration relationship between all the variables except for the real exchange rate, which has a statistically non-significant pass-through coefficient. The real interest rate has a noteworthy long-run positive effect on the housing loans lending rate compared to others. The affirmative effect on real stock prices is the highest for the technology sector. The short-run effect of the real interest rate on lending rates, real stock prices and the real exchange rate are statistically non-significant except for the overall stock price index, and the vehicle loans lending rate which has a higher coefficient than the deposit rate. (3) NVECM results allow testing of eleven hypotheses and highlight the symmetric relationship and the valid pass-through effect, and reject the strong exogeneity assumption for all variables.

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Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data

Cited by 71 publications

References 28 publications

The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries

The Impact of Monetary Policies on the Sustainable Economic and Financial Development in the Euro Area Countries

Bank lending margins in the euro area: Funding conditions, fragmentation and ECB's policies

Loom of Symmetric Pass-Through

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