Money Market Uncertainty and Retail Interest Rate Fluctuations: A Cross-Country Comparison

16 Pages Posted: 22 Feb 2007

See all articles by Burkhard Raunig

Burkhard Raunig

Austrian National Bank - Economic Studies Division

Johann Scharler

University of Linz - Department of Economics

Date Written: February 2007

Abstract

This paper analyzes empirically the relationship between money market uncertainty and unexpected deviations in retail interest rates in a sample of 10 OECD countries. We find that, with the exception of the US, money market uncertainty has only a modest impact on the conditional volatility of retail interest rates. Even for the US we find that the effects of money market uncertainty are spread out over time. Our results are consistent with the hypothesis that banking relationships include implicit insurance arrangements and thereby reduce uncertainty.

Keywords: Interest Rate Pass-Through, Relationship Banking, Conditional Volatility

JEL Classification: E43, G21

Suggested Citation

Raunig, Burkhard and Scharler, Johann, Money Market Uncertainty and Retail Interest Rate Fluctuations: A Cross-Country Comparison (February 2007). Available at SSRN: https://ssrn.com/abstract=964609 or http://dx.doi.org/10.2139/ssrn.964609

Burkhard Raunig (Contact Author)

Austrian National Bank - Economic Studies Division ( email )

POB 61
Vienna, A-1011
Austria
+43 1 404 20 7219 (Phone)
+43 1 404 20 7299 (Fax)

Johann Scharler

University of Linz - Department of Economics ( email )

Altenbergerstrasse 69
Linz, A-4040
Austria

HOME PAGE: http://www.econ.jku.at/scharler

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