Bank Interest Rate Pass-Through: New Evidence from French Individual Data

59 Pages Posted: 22 Sep 2010

See all articles by Anne de la Serre

Anne de la Serre

affiliation not provided to SSRN

Sébastien Frappa

Banque de France

Jeremi Montornes

Banque de France

Michèle Murez

Banque de France

Date Written: January 1, 2008

Abstract

The present paper investigates the pass-through mechanism between market interest rates and bank interest rates using a panel of French banks based on new ESCB harmonised bank interest rate statistics (MIR: Monetary Interest Rates). The data are extracted from new individual contracts on a monthly basis for the three main segments of the credit market (consumers loans, mortgage loans and loans to non-financial firms) from January 2003 to July 2007.

The pass-through is estimated using two approaches: firstly a univariate approach for each bank and secondly a panel data approach. An evaluation of the adjustment lag at which market rates are passed through to retail bank rates is also carried out. Our results confirm an incomplete adjustment of bank rates to changes in market rates in the long-term for loans to non-financial firms and mortgage loans. In addition, our findings suggest significant heterogeneity in the pricing of loans depending on the type of credit, the size and the legal category of banks.

Keywords: Transmission Mechanism of Monetary Policy, Non-stationary Panel Data, Cross-section Dependance

JEL Classification: G21, C22, C23

Suggested Citation

de la Serre, Anne and Frappa, Sébastien and Montornes, Jeremi and Murez, Michèle, Bank Interest Rate Pass-Through: New Evidence from French Individual Data (January 1, 2008). Banque de France Working Paper No. 194, Available at SSRN: https://ssrn.com/abstract=1680314 or http://dx.doi.org/10.2139/ssrn.1680314

Anne De la Serre (Contact Author)

affiliation not provided to SSRN ( email )

Sébastien Frappa

Banque de France ( email )

Paris
France

Jeremi Montornes

Banque de France ( email )

DGEI 41-1430
75049 Paris Cedex 01
Paris, 75049
France

Michèle Murez

Banque de France ( email )

Paris
France

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