Hristov, Nikolay Hülsewig, Oliver Wollmershäuser, Timo
Year of Publication:
CESifo Working Paper: Monetary Policy and International Finance 3964
This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro-area banks to the global financial crisis. We focus on their interest-rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding is that the pass-through from changes in the money market rate to retail bank rates became significantly less complete during the crisis. Model simulations show that this result can be well explained by a significant increase in the frictions that the banks' business is subject to.
Euro Area global financial crisis interest rate pass-through panel vector autoregressive model sign restrictions structural break DSGE model