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

By Robert C. M. Beyer, Ruo Chen, Florian Misch, Claire Li, Ezgi O. Ozturk, Lev Ratnovski

January 12, 2024

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Robert C. M. Beyer, Ruo Chen, Florian Misch, Claire Li, Ezgi O. Ozturk, and Lev Ratnovski. Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The extent to which changes in monetary policy rates lead to changes in loan and deposit rates for households and firms, referred to as ‘pass-through’, is an important ingredient of monetary policy transmission to output and prices. Using data on seven different bank interest rates in 30 European countries, different approaches, and the full sample as well as a subsample of euro area countries, we show that a) the pass-through in the post-pandemic hiking cycle has been heterogenous across countries and types of interest rates; b) the pass-through has generally been weaker and slower, except for rates of non-financial corporation loans and time deposits in euro area countries; c) differences in pass-through over time and across countries for most deposit rates are correlated with financial sector concentration, liquidity, and loan opportunities, and d) the effects of pass-through to outstanding mortgage rates on monetary transmission on prices and output are heterogenous across countries.

Subject: Central bank policy rate, Deposit rates, Economic sectors, Financial institutions, Financial Sector, Financial services, Loans, Mortgages

Keywords: Central bank policy rate, Deposit rates, Europe, Financial sector, Loans, Monetary Policy Pass-Through, Monetary Policy Transmission, Mortgages, NFC loan rate, Pass-through to rate, Transmission to output

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/009
Stock No:

WPIEA2024009
ISBN:

9798400263613
ISSN:

1018-5941

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