Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157232
Authors: 
Hennecke, Peter
Year of Publication: 
2017
Series/Report no.: 
Thünen-Series of Applied Economic Theory 151
Abstract: 
In this paper it is shown that the ECB's main refinance rate, measured by various Taylor-rules, is far too low for Germany for over half a decade. That entails risks for the stability of Germany's financial system. How strong these risks materialize depends on the extent to which German banks pass on the low policy rates to their customers. In this paper, the interest rate pass-through in Germany in the low interest era is investigated using error-correction models for various bank interest rates. The results indicate a stronger short-term pass-through as well as diminished interest rate margins that weigh on banks' profits. However, there is no evidence for structural changes in the long-term relationship between policy rates and banks' interest rates. While the latter might be soothing for monetary policy makers, the former is rather a reason for concern.
Subjects: 
low interest rates
interest rate pass-through
interest rate channel
JEL: 
E43
E58
Document Type: 
Working Paper

Files in This Item:
File
Size
959.57 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.