The interest rate pass-through during the Effective Lower Bound: has the ECB lost control on the retail-banking markets?
Christophe Blot  1, *@  , Fabien Labondance * @
1 : OFCE-Sciences Po & Université Paris Nanterre
Sciences Po
10, Place de Catalogne 75014 Paris -  France
* : Auteur correspondant

The aim of this paper is to investigate if the interest rate pass-through is still functioning in the euro area when the policy rate reaches the effective lower bound (ELB). To that end, we estimate a panel-ECM. To account for non-stationarity and potential heterogeneities in the transmission channels, we first test for cointegration and then apply the mean-group estimator. Our findings suggest that ECB monetary policy, measured by the shadow rate have been effective in the euro area even after May 2009 when the ELB was reached. Besides, we estimate separate equations for core and peripheral countries and find that monetary policy had sometimes a stronger impact in the periphery suggesting that the ECB actions would have been effective to restore homogeneity of the monetary policy transmission.

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