Friday , May 29 2020
Home / Bank of International Settlement / The impact of unconventional monetary policies on retail lending and deposit rates in the euro area

The impact of unconventional monetary policies on retail lending and deposit rates in the euro area

Summary:
BIS Working Papers  |  No 850  |  31 March 2020 by  Boris Hofmann, Anamaria Illes, Marco Jacopo Lombardi and Paul Mizen PDF full text (733kb)  |  34 pages Focus This paper analyses the impact of the ECB's unconventional monetary policy measures, as launched between 2008 and 2019, on retail lending and deposit rates as well as on banks' retail lending-deposit rate spreads in the four major euro area countries. Contribution We use an analytical approach that combines the estimation of the cumulative effects of unconventional monetary

Topics:
International Settlement considers the following as important:

This could be interesting, too:

Amol Agrawal writes COVID-19 and non-performing loans: lessons from past crises

New York Fed writes Job Training Mismatch and the COVID-19 Recovery: A Cautionary Note from the Great Recession

Louise Egan writes What’s behind your mortgage rate

Amol Agrawal writes Interview of Joshua Angrist: On charter schools, the elite illusion, and the “Stones Age” of econometrics

BIS Working Papers  |  No 850  | 
31 March 2020
PDF full text
 (733kb)
 |  34 pages

Focus

This paper analyses the impact of the ECB's unconventional monetary policy measures, as launched between 2008 and 2019, on retail lending and deposit rates as well as on banks' retail lending-deposit rate spreads in the four major euro area countries.

Contribution

We use an analytical approach that combines the estimation of the cumulative effects of unconventional monetary policy measures via event study analysis with retail rate pass-through estimation. That way, we assess the full effect of the ECB's unconventional monetary policies implemented between 2008 and 2019 on retail lending and deposit rates and systematically explore differences in their effects across the four major euro area countries.

Findings

Our results show that the ECB's unconventional monetary policy measures - particularly those launched since 2012 - significantly lowered retail lending and deposit rates in Germany, France, Spain and particularly in Italy. The impact on banks' intermediation margins through retail lending-deposit rate spreads turns out not to be clear-cut, with significant compressions prevailing only in Germany and Italy.


Abstract

This paper investigates the overall effect of the European Central Bank's (ECB's) unconventional monetary policies (UMPs) implemented since 2008 on euro area bank retail lending and deposit rates offered to households and non-financial corporations. To do so, we use an analytical approach that combines the estimation of the cumulative effects of UMP on key money and capital market rates via daily event study analysis with monthly retail rate pass-through estimation. In counterfactual simulations, we quantify the full effect of the ECB's UMPs implemented since 2008 on retail lending and deposit rates and systematically explore differences in their effects over time and across euro area countries. Our results show that the ECB's UMPs - particularly the measures launched since 2012 - significantly lowered retail lending and deposit rates in Germany, France, Spain and in particular in Italy. The impact on banks' intermediation margins through retail lending-deposit rate spreads turns out to be not clear-cut, with significant compressions prevailing only in Germany and Italy.

JEL classification: E43, E52, G21

Keywords: retail rates, pass-through, unconventional monetary policy, European Central Bank

International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

Leave a Reply

Your email address will not be published. Required fields are marked *