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Hristov, Nikolay; Hülsewig, Oliver; Wollmershäuser, Timo (2012): The interest rate pass-through in the Euro area during the global financial crisis. CESifo Working Paper: Monetary Policy and International Finance, 3964
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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.