The Interactions between the Lending Rates, Deposit Rates and Money Market Rates

Authors

1 University of Sousse, Susah, Tunisia

2 LaMIDED, University of Sousse, Susah, Tunisia

3 IPAG Business School, Paris, France

Abstract

T





he present paper investigates the impact of the financial crisis on the interaction between the lending rates, deposit rates and money market rates through the process of retail bank interest rate pass-through in the countries of the Euro area. Among our findings is the heterogeneity of bank rate adjustments across sectors, loans and deposits. That was mainly marked during the pre-crisis period by a complete or high long-term pass-through for deposit rates and incomplete for lending rates. However, in the post-crisis period, the degree of pass-through dropped for all bank rates. In addition, we see that the bank rates have become more rigid due to market turbulence since the speed of adjustment towards equilibrium slowed down significantly. Finally, the results show that there is an interdependence of banks' decisions on lending rates as well as deposit rates. It is thus a valuable input in the transmission mechanism of monetary policy.
 

Keywords


Belke, A., Beckmann, J., & Verheyen, F. (2013). Interest Rate Pass-Through in the EMU – New Evidence from Nonlinear Cointegration Techniques for Fully Harmonized Data. Journal of International Money and Finance, 37, 1-24.
Blot, C., & Labondance, F. (2011). Bank Interest Rate Pass-through in the Eurozone: Monetary Policy Transmission during the Boom and Since the Financial Crash. 15th Annual Conference on Macroeconomic Analysis and International Finance, Retrieved from
http://economics.soc.uoc.gr/macro/docs/Year/2011/papers/paper_4_126.pdf.
Coffinet, J. (2005). Single Monetary Policy and Interest Rate Channel in France and the Euro Zone. Bulletin de la Banque de France,136, 29-40.
 
 
 
Cottarelli, C., & Kourelis, A. (1994). Financial Structure, Bank Lending Rate and the Transmission Mechanism of Monetary Policy. International Monetary Fund, 41, 587-623.
Cottarelli, C., Ferri, G., & Generale, A. (1995). Bank Lending Rates and Financial Structure in Italy: a Case Study. International Monetary Fund, 42, 670-700.
De Bondt, G. (2002). Retail Bank Interest Rate Pass-through: New Evidence at the Euro Area Level. European Central Bank, Working Paper, Retrieved from
https://www.econstor.eu/bitstream/10419/152570/1/ecbwp0136.pdf.
De Bondt, G. J. (2005). Interest Rate Pass-through: Empirical Results for the Euro Area. German Economic Review, 6, 37-78.
Gambacorta, L., & Marques-Ibanez, D. (2011). The Bank Lending Channel: Lessons from the Crisis. Monetary and Economic Department BIS Working Papers, Retrieved from
https://www.econstor.eu/bitstream/10419/153769/1/ecbwp1335.pdf.
Grigoli, F., & Mota, J. M. (2017). Interest Rate Pass-through in the Dominican Republic. Latin American Economic Review, 26(4), 1-25.
Gropp, R., Sørensen, C., & Lichtenberger, J. (2007). The Dynamics of Bank Spreads and Financial Structure. European Central Bank, Working Paper Series, Retrived from
https://www.econstor.eu/bitstream/10419/153148/1/ecbwp0714.pdf.
Jobst, C., & Kwapil, C. (2008). The Interest Rate Pass-through in Austria – Effects of the Financial Crisis. Monetary Policy & the Economy, 8, 54-67.
Karagiannis, S., Panagopoulos, Y., & Vlamis, P. (2010). Interest Rate Pass-through in Europe and the US: Monetary Policy after the Financial Crisis. Journal of Policy Modeling, 32, 323-338.
Kempa, B., & Khan, N. S. (2017). Spillover Effects of Debt and Growth in the Euro Area: Evidence from a GVAR Model. International Review of Economics & Finance, 49(January), 102-111.
Kitamura, T., Muto, I., & Takei, I. (2016). Loan Interest Rate Pass-through and Changes after the Financial Crisis: Japan’s Evidence. Journal of the Japanese and International Economies, 42, 10-30.
Maudos. J., & De Guevara, F. (2004). Factors Explaining the Interest Rate Margin in the Banking Sectors of the European Union. Journal of Banking and Finance, 28, 2259-2281.
Mojon, B. (2001). Financial Structure and the Interest Rate Channel of ECB Monetary Policy. European Central Bank, Working Paper, Retrieved from
https://www.econstor.eu/bitstream/10419/152474/1/ecbwp0040.pdf.
Muhtaseb, B. (2017). Interest Rate Pass-through and Monetary Transmission in Lebanon Loan Market. International Journal of Business an Economic Research, 6(1), 1-6.
Rocha, M. D. (2012). Interest Rate Pass-through in Portugal : Interactions, Asymmetries and Heterogeneities. Journal of Policy Modeling, 34, 64-80.
Stanislawska, E. (2014). Interest Rate Pass-through in Poland. Evidence from Individual Bank Data. NBP Working Paper, Retrieved from
http://ssl.nbp.pl/publikacje/materialy_i_studia/179_en.pdf.
Von Borstel, J., Eickmeier, S., & Krippner, L. (2016). The Interest Rate Pass-through in the Euro Area during the Sovereign Debt Crisis. Journal of International Money and Finance, 68, 386-402.
Sekrafi, H., & Sghaier, A. (2016). Examining the Relationship between Corruption, Economic Growth, Environmental Degradation and Energy Consumption: A Panel Analysis in MENA Region. Journal of the Knowledge Economy, 7(2), 963-979.
Sekrafi, H., & Sghaier, A. (2018a). Exploring the Relationship between Tourism Development, Energy Consumption and Carbon Emissions : A Case Study of Tunisia. International Journal of Social Ecology and Sustainable Development (IJSESD), 9(1), 26-39.
 
Sekrafi, H., & Sghaier, A. (2018b). The Relation between Corruption, Energy Consumption and Co2 Emissions : the Case of Tunisia. PSU Research Review, 2(1), 81-95.
Soufeljil, M., Sghaier, A., Mighri, Z., & Kheireddine, N.  (2017). The Financial Structure of the Tunisian Listed Businesses: an Application on Panel Data. Journal of Global Entrepreneurship Research, Retrieved from https://doi.org/10.1186/s40497-017-0081-3.