Our colleague Roman Horváth together with Jana Kotlebová and Mária Širaňová from University of Economics in Bratislava, Slovakia published an article "Interest Rate Pass-Through in the Euro Area: Financial Fragmentation, Balance Sheet Policies and Negative Rates" in the Journal of Financial Stability.
The authors examine interest rate pass-through in the euro area over the 2008–2016 period and investigate the effects of financial market fragmentation, European Central Bank balance sheet policies and negative rates on the nature of pass-through. The authors use heterogeneous panel cointegration methods and bank interest rates for four different loan categories: small and large firm loans, housing loans and consumer loans. The authors find that interest rate pass-through is complete only for small firm loans; it is thus incomplete for other loan categories. The results suggest that while interest rate pass-through has been weakened by higher sovereign credit risk, the European Central Bank's balance sheet policies helped curb these adverse effects on pass-through. Lower financial market fragmentation translated into lower lending rates. In addition, authors fail to find evidence that bank interest rates became less responsive to market rates when market rates became negative.
For the full article follow this link.
Autor - Mgr. Lucie Křížová M.A.