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Dynamic hierarchical models for monetary transmission
Author(s) -
Parisi Laura
Publication year - 2017
Publication title -
statistical analysis and data mining: the asa data science journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.381
H-Index - 33
eISSN - 1932-1872
pISSN - 1932-1864
DOI - 10.1002/sam.11338
Subject(s) - monetary policy , interest rate , economics , monetary economics , credit channel , forward guidance , macroeconomics , inflation targeting
Monetary policies, either actual or perceived, cause changes in monetary interest rates. These changes impact the economy through financial institutions, which react to changes in the monetary policy with changes in their administered rates, on both deposits and lendings. In this paper we provide a dynamic modeling for describing how administered bank interest rates react in response to changes in money market rates, in a multicountry setting: in addition, by means of hierarchical equations, we take into account how such changes are affected by the macroeconomic fundamentals of each country. The paper applies the proposed models to interest rates on different loans (to corporates and families) in seven European economies, showing how the monetary policy and the specific situation of each country have differently impacted lendings across time.