tailieunhanh - IMPACT OF BANK COMPETITION ON THE INTEREST RATE PASS-THROUGH IN THE EURO AREA

This paper uses interest rate data that cover a longer period and that are based on more harmonised principles than those used by previous pass-through studies for the euro area. We find that stronger competition implies significantly lower interest rate spreads for most loan market products, as we expected. Using an error correction model (ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Furthermore, where loan market. | EUROPEAN CENTRAL BANK EUROSYSTEM WORKING PAPER SERIES NO 885 I MARCH 2008 by Michiel van Leuvensteijn Christoffer Kok Sorensen Jacob A. Bikker and Adrian . van Rixtel IMPACT OF BANK COMPETITION ON THE INTEREST RATE PASS-THROUGH IN THE EURO AREA EUROPEAN CENTRAL BANK EUROSYSTEM WORKING PAPER SERIES NO 885 I MARCH 2008 IMPACT OF BANK COMPETITION ON THE INTEREST RATE PASS-THROUGH IN THE EURO AREA 1 by Michiel van Leuvensteijn 2 Christoffer Kok Sorensen 3 Jacob A. Bikker4 and Adrian . van Rixtel5 In 2008 all ECB publications feature a motif taken from the 10 banknote. This paper can be downloaded without charge from http or from the Social Science Research Network electronic library at http abstract_id ll05385. Ì The authors are grateful to A. Banarjee F. Drudi L. Gambacorta R. Gropp A. Houben T. Werner and participants in an internal ECB seminar 22 September 2006 the XV International Tor Vergata conference on Money fi nance and growth Rome 10-12 December 2006 a DNB Research Seminar 23January 2007 and an ECB Workshop on Interest rates in retail banking markets and monetary policy 5 February 2007 for valuable comments and suggestions. The views expressed in this paper are the authors and do not necessarily reflect those of the ECB or the CPB DNB or BdE. 2 CPB Netherlands Bureau for Economic Policy Analysis . Box 805Ì0 2508 GM The Hague the Netherlands e-mail mvl@. When this paper was written the author was affiliated with the ECB. 3 Directorate General Economics European Central Bank . Box Ì603Ì9 60066 Frankfurt am Main Germany e-mail christofferkok_sorensen@ 4 De Nederlandsche Bank DNB Supervisory Policy Division Strategy Department . Box 98 1000 AB Amsterdam The Netherlands e-mail . Professor of Banking and Financial Regulation at Utrecht School of Economics University of Utrecht janskerkhof 12 NL-35ÌÌ BL Utrecht the Netherlands. 5 Banco de Espana International Economics and International