The Impact of Unconventional Monetary Policies on Retail Lending and Deposit Rates in the Euro Area

34 Pages Posted: 15 Apr 2020

See all articles by Boris Hofmann

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Anamaria Illes

Bank for International Settlements (BIS)

Marco J. Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Date Written: March 31, 2020

Abstract

This paper investigates the overall effect of the European Central Bank's (ECB's) unconventional monetary policies (UMPs) implemented since 2008 on euro area bank retail lending and deposit rates offered to households and non-financial corporations. To do so, we use an analytical approach that combines the estimation of the cumulative effects of UMP on key money and capital market rates via daily event study analysis with monthly retail rate pass-through estimation. In counterfactual simulations, we quantify the full effect of the ECB's UMPs implemented since 2008 on retail lending and deposit rates and systematically explore differences in their effects over time and across euro area countries. Our results show that the ECB's UMPs - particularly the measures launched since 2012 - significantly lowered retail lending and deposit rates in Germany, France, Spain and in particular in Italy. The impact on banks' intermediation margins through retail lending-deposit rate spreads turns out to be not clear-cut, with significant compressions prevailing only in Germany and Italy.

Keywords: retail rates, pass-through, unconventional monetary policy, European Central Bank

JEL Classification: E43, E52, G21

Suggested Citation

Hofmann, Boris and Illes, Anamaria and Lombardi, Marco Jacopo and Mizen, Paul, The Impact of Unconventional Monetary Policies on Retail Lending and Deposit Rates in the Euro Area (March 31, 2020). BIS Working Paper No. 850, Available at SSRN: https://ssrn.com/abstract=3571406

Boris Hofmann (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Anamaria Illes

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Marco Jacopo Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41612809492 (Phone)

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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