Skip to main content

Are there asymmetries in the response of bank interest rates to monetary shocks?

Buy Article:

$55.00 plus tax (Refund Policy)

Abstract:

This article examines the velocity and asymmetry of the response of bank interest rates to monetary policy shocks. Using an asymmetric vector error correction model, it analyses the pass-through of changes in money market rates to retail bank interest rates in Italy in the period 1985-2002. The main results of the article are: (1) the speed of adjustment of bank interest rates to monetary policy changes increased significantly after the introduction of the 1993 Consolidated Law on Banking; (2) interest rate adjustment in response to positive and negative shocks is asymmetric in the short run, but not in the long run; (3) banks adjust their loan (deposit) rate faster during periods of monetary tightening (easing); (4) this asymmetry almost vanished since the 1990s.

Document Type: Research Article

DOI: https://doi.org/10.1080/00036840600707241

Affiliations: 1: Economic Research Department, Banca d'Italia, Rome 00184, Italy 2: Competition, Regulation and General Affairs, Banca d'Italia, Rome, Italy

Publication date: 2007-10-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more