Heterogeneity in bank pricing policies: The Czech evidence

Roman Horvath and Anca Pruteanu-Podpiera

Economic Systems, 2012, vol. 36, issue 1, 87-108

Abstract: We estimate the pass-through from market interest rates to bank interest rates using heterogeneous panel cointegration techniques to address heterogeneity at the bank level in the Czech Republic. The results indicate heterogeneity in bank pricing in the short, but not in the long term. Mortgage rates and firm rates typically adjust to money market changes, but often less than fully in the long run. Large corporate loans have a smaller mark-up than small loans. Consumer rates have a high mark-up and do not exhibit a cointegration relationship with money market rates even in the long run. Next, we examine how bank characteristics determine the nature of interest rate pass-through in a cross-section of Czech banks. We find evidence for relationship lending, as banks with a stable pool of deposits smooth interest rates and require a higher spread as compensation. Large banks are not found to price their products less competitively. Greater credit risk increases vulnerability to money market shocks.

Keywords: Monetary transmission; Financial structure; Bank pricing policies (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362511000574
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Heterogeneity in Bank Pricing Policies: The Czech Evidence (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:36:y:2012:i:1:p:87-108

DOI: 10.1016/j.ecosys.2011.03.002

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().