Expected Versus Unexpected Monetary Policy Impulses and Interest Rate Pass-Through in Eurozone Retail Banking

S. Kleimeier, H. Sander

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper investigates the interest rate pass-through in the euro-zone’s retail banking markets by differentiating between expected and unexpected monetary policy impulses. The paper introduces interest futures as measures of expected interest rates into pass-through studies. By allowing various specifications of the pass-through process, including asymmetric adjustment, we find a faster pass-through in loan markets when interest rate changes are correctly anticipated. In contrast, deposit markets are found to be more rigid. Overall, our results suggest that a well-communicated monetary policy is important for a speedier and a more homogenous pass-through but may also be complemented by competition policies.
Original languageEnglish
Pages (from-to)1839-1870
Number of pages31
JournalJournal of Banking & Finance
Volume30
Issue number7
DOIs
Publication statusPublished - 1 Jan 2006

Cite this