Paper title: Threshold effects in monetary policy transmission to the euro area credit markets
Natalia Levenko

Abstract:

The paper examines the intermediate stage of monetary policy transmission by analysing how credit growth responds to interest rate changes. It studies the markets for mortgages, consumer credit, and corporate loans separately, and pays special attention to periods when the short-term interest rate was very low. It uses quarterly country-level data from 2005Q1 to 2022Q4 for 15 euro area countries and applies standard panel-data estimation techniques. The results indicate that credit markets respond to changes in monetary policy in the expected way. While the magnitude of the reaction varies across credit markets, there are no discernible differences between the reactions of different subgroups in the sample. The hypothesis that monetary policy might be less effective when interest rates are very low is not supported by the empirical evidence. Rather the opposite, the paper finds that when Euribor is very low, credit markets become more responsive to changes in interest rates. This holds true primarily in the market for corporate loans and to some extent in the market for mortgages.

The public research seminars of the Department of Economics and Finance (DEF) at Tallinn University of Technology  usually take place on the second and fourth Wednesdays of the month in online format, unless announced otherwise. The seminar will last one hour, presentation will last approximately 45 minutes followed by 15 minutes of discussion. The seminars are held in English. Questions about the seminar can be sent to the seminar coordinator Natalia Levenko: natalia.levenko@taltech.ee.