How related are interbank and lending interest rates? Evidence on selected EU countries

Heryan, Tomas and Stavarek, Daniel (2010): How related are interbank and lending interest rates? Evidence on selected EU countries. Published in: European Financial and Accounting Journal , Vol. 5, No. 3-4 : pp. 42-55.

Abstract

This paper investigates the nature of the causal relationships among interbank market interest rates and corporate loans interest rates in four countries from the euro area (Austria, Belgium, France and Italy), and in the Czech Republic. The paper also estimates a development of bank credit margin in banking industries of these countries in period from January 2004 to March 2010. Using Johansen cointegration and Granger causality tests on monthly data we investigate long-term as well as short-term causalities between the interest rates. The results suggest that interest rate relationships differ in all selected countries, and also that foreign majority owners of the Czech banks could affect interest rate policy of the subsidiaries to offset losses realized by the parent banks.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cointegration; Granger Causality; Interbank Interest Rates; Lending Interest Rates; European Union
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration

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