Banking integration and fragmentation in the interest rate channel

At the forefront of the economic consolidation of the euro area, banking integration came to a stall following the beginning of the 2008 crisis. Since then European banks started retrenching their asset holdings within national borders, effectively reducing the scale of their European operations. This paper explores the link between banking integration and fragmentation in the interest rate channel in the eurozone. Using a rolling VAR, I estimate the overtime evolution of the interest rate pass-through across European countries, and then I relate this evidence to banking integration dynamics. The results support the existence of a statistically significant and negative link between banking integration and cross-country differentials in the interest rate channel.


Publication infos:
Geneva, The Graduate Institute of International and Development Studies, 2015
Publication year:
2015
Number of pages:
26 p.
Collection:
Graduate Institute of International and Development Studies Working Paper ; no: 05/2015



 Record created 2015-07-07, last modified 2019-08-05

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