The interest rate pass-through in the euro area during the sovereign debt crisis

Borstel, Julia von; Eickmeier, Sandra; Krippner, Leo

doi:10.1016/j.jimonfin.2016.02.014

Cited by 79 publications

(64 citation statements)

References 42 publications

(46 reference statements)

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“…Havranek et al (2016) indicated that before financial crisis, the pass-through effect was nearly perfect in the long run, but it turned weak after the crisis. This finding is in contrast with Borstel et al (2016) where they find no difference in the interest rate pass-through of lending rates with the financial crisis.…”

Section: Literature Reviewcontrasting

confidence: 83%

The pass-through effect of interest rate and asymmetric adjustment in Indonesia

Puah¹,

Liew²,

Tang³

2017

EA-XXI

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Abstract. Using the data set for the sample period of January 1999 to December 2016, this paper aims to analyse the interest rate pass-through effect and the asymmetric behaviour of retail rates in Indonesia's economy. By employing asymmetric threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) models, the deposit and lending rates were found to have an incomplete pass-through effect in response to the changes in the money market rates. Based on the empirical results, an asymmetric behaviour was discovered in the adjustment of the deposit and lending rates. The asymmetric error correction models further reflected that the deposit rate has a faster speed in the downward direction while the lending rate adjusts more rapidly in the upward direction.

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Section: Literature Reviewcontrasting

confidence: 83%

The pass-through effect of interest rate and asymmetric adjustment in Indonesia

Puah¹,

Liew²,

Tang³

2017

EA-XXI

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“…Lemke and Vladu (2014) consider the estimation of the SSR for the Euro area using the framework of Wu and Xia (2013). Borstel et al (2015) use the SSR to evaluate the effects of ECB policy measures on bank lending rates and markups in the Euro area. Using the same Krippner's (2015) SSR measure, our analysis, in contrast, studies the effects of the monetary policy on output and prices.…”

Section: Introductionmentioning

confidence: 99%

“…Borstel et al (2015) use the SSR measure for the Euro area to assess the effects of the unconventional monetary policies on the banking system and interest rate passthrough effects during the sovereign crisis. Lemke and Vladu (2014) use shadow term structure modelling to analyze the shifts in the Euro area yield curve in relation to perceived shifts of the level of the interest rate lower bound.…”

Section: Introductionmentioning

confidence: 99%

Shadow short rate and monetary policy in the Euro area

Damjanović

Masten

2016

Empirica

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Empirical modelling of the monetary policy effects using conventional linear econometric models is put to a great test when interest rates approach the zero-lower bound. A possible remedy recently proposed in the literature is to introduce a shadow short rate (SSR) obtained from the yield curve model as an alternative monetary policy measure. This paper examines the usefulness of shadow rates as a policy stance measure for the Euro area. Moreover, the SSR can be used to study the country-specific monetary policy stance. We incorporate the shadow short rate in a standard vector autoregressive analysis to study the effects of monetary policy shocks both at the level of the Euro area and for two periphery EA countries, Italy and Spain, that endured significant financial stress during the crisis. Our analysis shows that monetary policy shocks identified form the SSR produce similar macro responses as shocks identified from the standard policy rate. The Euro area shocks can directly translate to a corresponding change in the country-specific financing conditions in the periphery, whereas the reverse effect is limited. The historical decomposition of the stochastic component of the SSR series shows that the unconventional policy measures were effective in stabilising the sovereign crisis in 2011, however, their relatively limited quantity provided only a weak stimulus to the economy.

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“…Many articles have studied the effect of conventional monetary policy in the Eurozone during the worldwide financial crisis. Andries and LecarpentierMoyal (2012), Blot and Labondance (2013), Belke, Beckmann, and Verheyen (2012), Aristei and Gallo (2012), Gigineishvili (2011), Panagopoulos, Reziti, and Spiliotis (2010), Karagiannis, Panagopoulos, and Vlamis (2010) and von Borstel, Eickmeier, and Krippner (2015) focus on the interest rate channel. However, during the financial crisis, implementing monetary policy became much more complex as the transmission mechanism has been severely impaired by disruptions in the financial markets; as a consequence, the ECB resorted to unconventional measures to provide additional stimulus to the economy.…”

Section: Introductionmentioning

confidence: 99%

The effect of ECB monetary policies on interest rates and volumes

2016

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This article assesses the transmission of ECB monetary policies, conventional and unconventional, to both interest rates and lending volumes or bond issuance for three types of different economic agents through five different markets: sovereign bonds at 6-month, 5-year and 10-year horizons, loans to nonfinancial corporations and housing loans to households, during the financial crisis, and for the four largest economies of the euro area. We look at three different unconventional tools: excess liquidity, longer-term refinancing operations and securities held for monetary policy purposes following the decomposition of the ECB's Weekly Financial Statements. We first identify series of ECB policy shocks at the euro area aggregate level by removing the systematic component of each series and controlling for announcement effects. We second include these exogenous shocks in country-specific structural VAR, in which we control for credit demand. The main result is that only the pass-through from the ECB rate to interest rates has been effective. Unconventional policies have had uneven effects and primarily on interest rates.

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The interest rate pass-through in the euro area during the sovereign debt crisis

Cited by 79 publications

References 42 publications

The pass-through effect of interest rate and asymmetric adjustment in Indonesia

The pass-through effect of interest rate and asymmetric adjustment in Indonesia

Shadow short rate and monetary policy in the Euro area

The effect of ECB monetary policies on interest rates and volumes

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