https://doi.org/10.52903/wp2025352
BANK CONCENTRATION AND ASYMMETRIC INTEREST RATE SPREADS PASS THROUGH: EVIDENCE FROM SELECTED EURO AREA COUNTRIES
Bragoudakis Zacharias
Bank of Greece, Economic Analysis and Research Department
Tsioutsios Alexandros
Department of Economics & UoA Center for Financial Studies, School of Economics and Political Sciences, National and Kapodistrian University of Athens.
ABSTRACT
The reaction of bank retail interest rates and deposit rates to shifts in interbank rates is influenced by the structural characteristics of the financial and banking system, as well as by the degree of competition within the banking sector. A recursive momentum threshold autoregressive asymmetric error correction model (Recursive MTAR-AECM) with non-linear adjustment is used to explore the existence of asymmetries in the adjustment of lending-deposits spreads to deviations in interbank rates for a group of selected euro countries. The findings provide evidence in favor of asymmetric adjustment in interest rate spreads and the asymmetric adjustment associated with the market power of banking sector concentration explanation of interest rate rigidity.
Keywords: Asymmetric adjustment, Banking concentration, Interest rates rigidity of spreads, Recursive MTAR-AECM
JEL-classifications: C20, C22, E43
Disclaimer: The views expressed in this paper are those of the authors and not necessarily those of either the Bank of Greece or the Eurosystem.
Acknowledgments: Comments from Demetrios Moschos, Hiona Balfoussia and an anonymous referee are greatly appreciated. All remaining errors are entirely our responsibility.
Corresponding author:
Zacharias Bragoudakis
Economic Analysis and Research Department
Bank of Greece
El.Venizelos 21, 10250 Athens, Greece
Tel.:+30-2103203605
email: zbragoudakis@bankofgreece.gr