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The Role of Asymmetries and Banking Sector Indicators in the Interest Rate Pass Through in Malta

Author

Listed:
  • Brian MICALLEF

    (Research Office Central Bank of Malta)

  • Noel RAPA

    (Research Office Central Bank of Malta)

  • Tiziana GAUCI

    (Economic and Monetary Analysis Office Central Bank of Malta)

Abstract

Retail interest rates in Malta have remained relatively high compared to other euro area countries despite the unprecedented monetary easing by the European Central Bank after the crisis This study looks at disaggregated estimates of interest rate pass through both for lending and deposit rates for the period 2000 2014 We also focus on developments since the financial crisis the role of asymmetries and how the inclusion of banking sector variables such as solvency liquidity and credit risk could influence the pass through estimates We find evidence of incomplete pass through even in the long run The pass through to deposit rates and lending rates to firms has declined after the crisis although the pass through to household lending rates was not affected We also find evidence of asymmetry with retail rates more responsive during periods of interest rate increases than cuts The inclusion of banking sector indicators helps to explain part of the drop in the pass through registered after the crisis although the main conclusion of incomplete pass through remains unaltered

Suggested Citation

  • Brian MICALLEF & Noel RAPA & Tiziana GAUCI, 2016. "The Role of Asymmetries and Banking Sector Indicators in the Interest Rate Pass Through in Malta," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 7(1), pages 5-13.
    • Handle: RePEc:srs:jasf00:v:7:y:2016:i:1:p:5-13
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    Cited by:

    1. Borg Ian & Micallef Brian, 2018. "Constructing a Financial Condition Index for a Small-Open Economy: The Case of Malta," Research in Applied Economics, Macrothink Institute, vol. 10(3), pages 89-105, September.
    2. Rita Schembri, "undated". "Ten years in Economic and Monetary Union: Malta’s experience," CBM Policy Papers PP/02/2018, Central Bank of Malta.
    3. Jude Darmanin, "undated". "The Financing of Companies in Malta," CBM Policy Papers PP/04/2017, Central Bank of Malta.
    4. William Gatt, 2022. "MEDSEA-FIN: an estimated DSGE model with housing and financial frictions for Malta," CBM Working Papers WP/05/2022, Central Bank of Malta.
    5. William Gatt & Germano Ruisi, 2022. "The spillover of euro area shocks to the Maltese economy," CBM Working Papers WP/03/2022, Central Bank of Malta.

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