Estimating the Monetary Policy Interest-Rate-To-Performance Sensitivity of the European Banking Sector at the Zero Lower Bound

22 Pages Posted: 30 Jan 2019

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Kai Henseler

University of Marburg - School of Business & Economics

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Date Written: October 23, 2018

Abstract

Using an event-study design, we investigate monetary policy interest-rate-to-performance sensitivity of the European banking sector over the 07/2012–06/2017 period when interest rates were (close to) zero. We apply the Wordscores approach to introductory statements of ECB's Governing Council press conferences to estimate a ‘shadow prime rate’. Based on short-run intraday event windows, we find shadow prime rate changes positively affect changes in the EURO-STOXX-Banks Future. Our findings add to the recent evidence documenting that Banks benefit from increasing interest rate levels in a low-interest-rate Environment..

Keywords: ECB, central bank communication, banking sector, interest rate sensitivity, textual analysis, Wordscores

JEL Classification: E43, E52, E58, G14, G21

Suggested Citation

Hayo, Bernd and Henseler, Kai and Rapp, Marc Steffen, Estimating the Monetary Policy Interest-Rate-To-Performance Sensitivity of the European Banking Sector at the Zero Lower Bound (October 23, 2018). Available at SSRN: https://ssrn.com/abstract=3318571 or http://dx.doi.org/10.2139/ssrn.3318571

Bernd Hayo

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Kai Henseler

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

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