https://doi.org/10.52903/wp2025345
DETAILS MATTER: LOAN PRICING AND TRANSMISSION OF MONETARY POLICY IN THE EURO AREA
Kārlis Vilerts
Latvijas Banka
Sofia Anyfantaki
European Central Bank and Bank of Greece
Konstantīns Beņkovskis
Latvijas Banka
Sebastian Bredl
Deutsche Bundesbank
Massimo Giovannini
Bank of Malta
Florian Matthias Horky
Národná banka Slovenska and Zeppelin University
Vanessa Kunzmann
Bank of Malta and Deutsche Bundesbank
Tibor Lalinský
Národná banka Slovenska
Athanasios Lampousis
Bank of Greece
Elizaveta Lukmanova
Central Bank of Ireland
Filippos Petroulakis
Bank of Greece
Klāvs Zutis
Latvijas Banka
ABSTRACT
Does the maturity of the relevant risk-free rate influence the strength of monetary policy pass-through to interest rates on new loans? To address this question, we present novel empirical evidence on lending practices across all euro area countries, using AnaCredit data covering nearly seven million new loans issued to non-financial corporations in 2022–2023. We document substantial variation in (a) the prevalence of fixed- vs floating-rate loans, (b) rate fixation periods, and (c) reference rates. This variation results in lending rates being exposed to different segments of the risk-free rate yield curve which, in turn, influence their sensitivity to monetary policy changes. We show that loans linked to shorter-maturity risk-free rates experience more pronounced monetary pass-through. Importantly, this effect is not purely mechanical, as part of the effect is offset by adjustments in the premium, revealing previously less-explored heterogeneity in the pass-through to lending rates.
Keywords: : Lending Rates, Interest Rate Pass-Through, Fixed-Rate Loans, Floating-Rate Loans
JEL-classifications: E52, E43, G21, E58
Disclaimer: This study has benefited greatly from comments received from participants in the Challenges for Monetary Policy Transmission in a Changing World (ChaMP) Research Network workshops held in Rome (June 2024) and Lisbon (October 2024), 32nd CEPR European Summer Symposium in International Macroeconomics (May 2025), and internal seminars at the Bank of Latvia, Bank of Finland, Deutsche Bundesbank, and Central Bank of Ireland. We are also grateful for the feedback from the participants in the Baltic Central Bank Research Seminar 2024 in Sigulda. Special thanks are due to Refet Gürkaynak, Vasso Ioannidou, Òscar Jordà and Carlo Altavilla for their thoughtful insights, and to the leadership team of the ChaMP Network – Philipp Hartmann, Diana Bonfim, and Margherita Bottero – for their guidance in improving this study. We extend our gratitude to all participants in the ChaMP cross-country project. The views expressed in this paper represent the authors’ personal opinions and do not necessarily reflect the views of the Eurosystem or its staff.
Corresponding author:
Kārlis Vilerts
Research Department
Latvijas Banka
K. Valdemara 2A, Riga, LV-1050, Latvia
email: Karlis.Vilerts@bank.lv