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Expected monetary policy and the dynamics of bank lending rates

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  • Kwapil, Claudia
  • Scharler, Johann

Abstract

In this paper we explore empirically to what extent expected monetary policy matters for the dynamics of bank lending rates in the U.S. and in the U.K. Based on endogenously determined break points, we document a number of structural breaks in the relationship between expected policy and retail interest rates. We find that banks have increasingly behaved in a forward-looking fashion by taking expected changes in monetary policy rates into account. Overall, our results provide support for the hypothesis that monetary policy has become more effective by successfully influencing private sector expectations.

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  • Kwapil, Claudia & Scharler, Johann, 2013. "Expected monetary policy and the dynamics of bank lending rates," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 542-551.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:542-551
    DOI: 10.1016/j.iref.2013.01.010
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    5. Gabriele Tondl, 2016. "Interest rates, corporate lending and growth in the Euro Area," Department of Economics Working Papers wuwp227, Vienna University of Economics and Business, Department of Economics.
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    More about this item

    Keywords

    Monetary policy; Expectations; Interest rate pass-through;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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