Are there asymmetries in the response of bank interest rates to monetary shocks?
- 1 October 2007
- journal article
- research article
- Published by Informa UK Limited in Applied Economics
- Vol. 39 (19), 2503-2517
- https://doi.org/10.1080/00036840600707241
Abstract
This article examines the velocity and asymmetry of the response of bank interest rates to monetary policy shocks. Using an asymmetric vector error correction model, it analyses the pass-through of changes in money market rates to retail bank interest rates in Italy in the period 1985–2002. The main results of the article are: (1) the speed of adjustment of bank interest rates to monetary policy changes increased significantly after the introduction of the 1993 Consolidated Law on Banking; (2) interest rate adjustment in response to positive and negative shocks is asymmetric in the short run, but not in the long run; (3) banks adjust their loan (deposit) rate faster during periods of monetary tightening (easing); (4) this asymmetry almost vanished since the 1990s.Keywords
This publication has 19 references indexed in Scilit:
- The Effects of Regulatory Reform on Competition in the Banking IndustryJournal of Money, Credit and Banking, 2003
- Modelling the demand for loans to the private sector in the euro areaApplied Economics, 2003
- Deposits and relationship lendingThe Review of Financial Studies, 1999
- Banks as Interest Rate ManagersJournal of Financial Services Research, 1998
- Time Series AnalysisPublished by Walter de Gruyter GmbH ,1994
- Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary PolicyStaff Papers, 1994
- Asymmetric Effects of Positive and Negative Money-Supply ShocksThe Quarterly Journal of Economics, 1992
- Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International EvidenceJournal of Business & Economic Statistics, 1992
- Analysis of time series subject to changes in regimeJournal of Econometrics, 1990
- A New Approach to the Economic Analysis of Nonstationary Time Series and the Business CycleEconometrica, 1989