Interest Rate Pass-Through and Monetary Transmission: Evidence from Individual Financial Institutions' Retail Rates

25 Pages Posted: 24 Mar 2004

See all articles by Paul Mizen

Paul Mizen

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

Boris Hoffman

University of Bonn

Abstract

Official interest rate changes should influence short rates on money market instruments and retail products, such as deposit accounts and mortgages, but complete pass-through is often taken for granted. This paper provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual UK financial institutions. The methodology allows for asymmetries and non-linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived 'gap' between retail and base rates is widening or narrowing.

Suggested Citation

Mizen, Paul and Hoffman, Boris, Interest Rate Pass-Through and Monetary Transmission: Evidence from Individual Financial Institutions' Retail Rates. Available at SSRN: https://ssrn.com/abstract=513460

Paul Mizen (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
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+44 115 951 5479 (Phone)
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Bank of England

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London, EC2R 8AH
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Boris Hoffman

University of Bonn

Postfach 2220
Bonn, D-53012
Germany

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