The Impact of Unconventional Monetary Policy on Major European Banks' Interest Spreads

48 Pages Posted: 1 Dec 2018

See all articles by Michael Sigmund

Michael Sigmund

Oesterreichische Nationalbank (OeNB)

Sophia Döme

Oesterreichische Nationalbank (OeNB)

Date Written: September 23, 2018

Abstract

In this paper, we analyze the effects of the unconventional monetary policy measures (UMP) of the European Central Bank on private sector spreads and loan and deposit interest rates by using a monthly-bank level dataset of 300 large euro area banks. As proposed by the standard literature, we estimate dynamic panel models to measure the influence of the expanded asset purchasing programmes on the private interest spread. Second, we estimate the spreads for non-financial corporates and household in a panel vector autoregression model to see if the UMP has led to sector specific differences. In the view of recent theoretical and empirical developments, we disentangle the interest spreads into loan and deposit rates and provide further empirical evidence that the UMP has decreased banks' interest income.

Keywords: Monetary policy transmission, bank interest spreads, unconventional monetary policy, panel vector autoregression

JEL Classification: E43, E44, E58, F42, G20

Suggested Citation

Sigmund, Michael and Döme, Sophia, The Impact of Unconventional Monetary Policy on Major European Banks' Interest Spreads (September 23, 2018). Available at SSRN: https://ssrn.com/abstract=3253772 or http://dx.doi.org/10.2139/ssrn.3253772

Michael Sigmund (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Sophia Döme

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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