## wpiea2024009-print-pdf

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---

### Introduction and scope
- Dataset and focus:
  - Covers 30 European countries and seven bank interest rate series: overnight (O/N) deposits and time deposits for households and NFCs; consumer loans; mortgages; and loans to NFCs.
  - Monthly, unbalanced panel; average number of years per country is 17.8.
  - Analysis uses descriptive statistics and regression analyses for the full sample and a subset of euro area countries (EA-12 countries).
- Rationale and mechanism:
  - Monetary policy targets a short-term money market rate which transmits via financial markets to deposit and lending rates of credit institutions and, through them, to the broader economy.
  - Channels emphasized: interest rate, cash flow, balance sheet, and banking channels, with specific effects of higher pass-through to loan rates and deposit rates summarized in the source.
- Data complements:
  - Complementary series include monetary policy rate, HICP and core HICP inflation, industrial production, banking sector concentration (Herfindahl–Hirschman index using bank assets), and loan-to-deposit ratio (LTD).

### Key stylized facts (summary)
- Heterogeneity across rate types and sectors:
  - Average pass-through highest for loans to NFCs, followed by time deposits; weakest for overnight deposits. Mortgage response lies between these.
  - Pass-through to NFC deposit rates generally exceeds pass-through to household deposit rates in nearly all countries.
- Cross-country heterogeneity:
  - Significant dispersion across countries in both level and dispersion of pass-through, reflecting financial sector concentration, liquidity, lending opportunities, and policy measures.
- Post-pandemic cycle overview:
  - Pass-through has been weaker and slower relative to past tightening cycles, except for rates of new loans to NFCs and NFC time deposits.
  - Weakening of pass-through to deposit rates is partly associated with higher financial sector concentration, more ample deposits relative to loan opportunities, and higher banking liquidity.
- Measurement:
  - Bank interest rate betas computed as the ratio of cumulative increase in bank interest rates to the cumulative increase in the policy rate.
  - For each country data are truncated from the month of the first rate hike until three months after the last hike (or the first rate cut or the end of sample).

### Comparison with previous tightening cycles (Section 4.2)
- Magnitude and pace of tightening:
  - Average cumulative policy rate increases in the post-pandemic cycle: 595bps.
  - Average cumulative policy rate increases in the comparator cycles: 231bps.
  - Pace of increase: around 35bps per month in the post-pandemic cycle, compared to 15bps per month during the comparator cycles.
- Main regression framework and long-run pass-through:
  - Equation (1) in a panel setting relates month-over-month changes in bank interest rates to contemporaneous and lagged changes in policy rates, distinguishing hikes and cuts and allowing a post-pandemic dummy; controls include K lags of ∆IP and ∆CPI, country fixed effects; long-run pass-through computed over K=6.
  - Regression results: pass-through significantly weaker in the post-pandemic cycle than in previous tightening cycles in both the full sample and EA-12, except for NFC loans (full sample) and NFC time deposits (both samples).
- Quantified average declines (across both samples):
  - Difference for HH and NFC O/N deposits: 0.2.
  - Difference for HH time deposits and mortgages: 0.4.
  - All differences above are statistically significant at the ten percent level.
  - Interpretation: A difference in pass-through of 0.2 implies that of a given policy rate hike, 20 percent less is passed on to bank interest rates.
- Speed of pass-through:
  - Local projection IRFs (Jordà, 2005) used to estimate cumulative responses and a pace metric (peak response divided by time to reach peak, peak within six months).
  - IRFs: pass-through in the post-pandemic cycle weaker than in previous cycles for most interest rates; exception: NFC loan and NFC time deposit rates similar between cycles.
  - Pace: overall slower in post-pandemic cycle, with NFC loans and time deposits slow initially but partly catching up; mortgage and O/N deposit rates slower and weaker with no catch-up.

### Determinants: competition, deposit volumes, liquidity
- Indicators used:
  - Banking concentration proxied by Herfindahl index of total assets.
  - Volume of deposits relative to loans proxied by loan-to-deposit ratio (LTD).
  - Bank liquidity measured via LCR and excess reserves (bank deposits at central banks minus minimum required reserves, expressed in percent of total euro area MFI assets).
- Concentration findings:
  - High concentration associated with lower pass-through to some deposit rates in both full sample and EA-12, though not all differences statistically significant at 10 percent.
  - Pass-through to loans: results non-conclusive or far from statistically significant, suggesting competition is a less important driver of lending rates.
- Loan-to-deposit ratio findings:
  - Higher LTD mostly associated with stronger pass-through to some deposit rates; three differences statistically significant at the 10 percent level, with higher statistical significance in the euro area.
  - Stronger role of LTD in the euro area consistent with more sluggish lending recovery and fewer profitable loan opportunities.
- Liquidity findings:
  - For the euro area, a statistically significant negative association between LCR and NFC O/N deposit betas.
  - Relationship between LCR and household deposit betas negative but not significant.
  - Excess reserves relationship with deposit betas statistically insignificant at conventional levels.
  - No correlation between bank liquidity measures and loan rate betas.
  - Interpretation: higher bank liquidity can reduce incentives to compete for deposits and thereby weaken pass-through to deposit rates; effects on lending rates ambiguous.
- Starting policy rate levels:
  - Including dummies for increases from positive versus zero/negative starting policy rates modestly reduces estimated differences in pass-through; quantitatively the effect of starting from zero/negative rates is small in this setting.

### Mortgage pass-through and aggregate effects (Section 4.5)
- Mortgage importance and heterogeneity:
  - Mortgages largest part of household debt in Europe; share ranges from about half of household debt in Hungary to more than 90 percent in the Netherlands.
  - Since the GFC, share of flexible-rate mortgages in new mortgages has decreased in many countries, reducing pass-through to outstanding mortgage rates, everything else equal.
  - Definitions: flexible-rate mortgages = interest fixation of less than a year; fixed-rate mortgages = interest fixation above one year.
  - Fixed-rate mortgages reprice when fixed term expires; pass-through decreases with higher average duration of fixed-rate mortgages.
  - Cross-country variation in fixed-rate durations is large (majority fixed for longer than ten years in Belgium; much lower maturities in the UK though still classified as fixed rate).
- Aggregate impact approximation:
  - Change in annual interest payments on mortgages approximated as: the change in the interest rate on existing mortgages multiplied by the stock of outstanding mortgages at the beginning of the cycle.
  - Variation across euro area economies is large; households in Portugal experienced an increase of interest costs of more than 1.2 percent of GDP annually based on this approximation.
- Data vintage and coverage for mortgage metrics:
  - Share of flexible-rate mortgages: 2012, 2022 or closest year with data.
  - Maturity of fixed-rate mortgages reported as of 2023Q2 (Netherlands as of 2023Q1; limited availability for other mortgage types in Greece).
  - Ending date for aggregate debt-service change series in Figure 18: August 2023.

### Methodological and robustness notes
- Empirical approach highlights:
  - Betas computed from month of first hike to three months after last hike (or first cut/end of sample); alternative specifications allow pass-through to begin up to six months before hikes to capture anticipation.
  - Local projections used for IRFs; K set to 6 for long-run cumulative effects (results similar with longer lags).
- Robustness:
  - Results broadly robust to including lagged levels and lagged changes of bank interest rates, year fixed effects, and alternative specifications distinguishing increases from positive versus zero/negative policy rates.
  - Including lagged change of the interest rate somewhat increases long-run pass-through to lending rates.

### Implications and suggested future research
- Implications:
  - Slower and weaker pass-through in the post-pandemic tightening cycle implies longer lags in monetary policy transmission than in the past, though ultimately policy effects may operate through similar channels.
  - Heterogeneity across instruments and countries implies monetary policy effectiveness and timing vary substantially across Europe.
- Suggested directions for future research (as stated):
  - Revisit results when more data become available to account for potential lags in pass-through and further robustness checks (including alternative measures of concentration).
  - Compare pass-through between hiking and loosening cycles.
  - Analyze pass-through to NFC loan rates more granularly.
  - Conduct more comprehensive analysis of monetary policy changes in conjunction with deposit and loan volumes.
  - Study determinants and effects of pass-through in partially euroized countries, where domestic-currency and euro-denominated rate interactions may matter.

*IMF Working Paper — Monetary Policy Pass-Through to Interest Rates (wpiea2024009-print-pdf)*

### 1. Introduction ........................................................................................................

### 1. Introduction

### Context and scope
- The post-pandemic surge in inflation triggered the most aggressive monetary policy tightening in decades and renewed interest in monetary policy transmission.
- This paper analyzes pass-through of policy rates in European economies to lending and deposit rates of credit institutions (bank interest rates), focusing on the post-pandemic hiking cycle.
- Data cover 30 European countries (euro area and non-euro area countries with independent monetary policy) and seven bank interest rate series: overnight (O/N) deposits and time deposits for households and NFCs; consumer loans; mortgages; and loans to NFCs.
- The dataset is monthly, unbalanced, with some series reaching back to 2003. The average number of years per country is 17.8.
- The analysis uses descriptive statistics and regression analyses for the full sample and a subset of euro area countries (EA-12 countries).

### Rationale and mechanism
- Monetary policy typically targets a short-term money market rate which transmits via financial markets to deposit and lending rates of credit institutions and, through them, to the broader economy.
- Bank interest rates affect investment, consumption, saving, debt service costs, savings income, and asset values—thus influencing output and prices.
- Pass-through of policy rate changes to bank interest rates affects monetary policy transmission and effectiveness.
- Pass-through itself can be influenced by financial sector concentration, liquidity, and availability of deposits relative to lending opportunities—factors that affect banks’ incentives to compete for deposits.

### Channels through which bank interest rates affect the real economy (during MP tightening)
- Interest rate channel
  - Mechanism: Higher hurdle rates for new investment; higher savings remuneration.
  - Effects of higher pass-through to loan rates: Less investment.
  - Effects of higher pass-through to deposit rates: More saving → Less consumption.
- Cash flow channel
  - Mechanism: Higher interest income and debt service costs for existing exposures.
  - Effects of higher pass-through to loan rates: Lower cash flow → Less consumption and investment.
  - Effects of higher pass-through to deposit rates: Higher cash flow → More consumption and investment.
- Balance sheet channel
  - Mechanism: Lower value of collateral tightening non-price credit conditions.
  - Effects: Tighter credit conditions → Less investment.
- Banking channel
  - Mechanism: Higher bank net interest margins and potential effects on bank funding.
  - Effects of higher pass-through to loan rates: Lower banks’ net worth → Tighter funding → Less lending.
  - Effects of higher pass-through to deposit rates: Higher cost of bank funding but more supply of deposits → More lending.

- On balance, higher pass-through of monetary policy to interest rates generally strengthens monetary policy transmission, though higher pass-through to deposit rates can create ambiguous effects (e.g., higher savings income can offset some contractionary effects).

### Contributions of this paper
- Compiles data on seven interest rates for 30 European countries, covering key types of new loans and deposits for households and NFCs, and includes outstanding mortgage rates.
- Documents stylized facts for the post-pandemic hiking cycle:
  - a) Pass-through is heterogeneous across countries and interest rate types.
  - b) Pass-through has been weaker and slower relative to past hiking cycles, except for rates of new loans to NFCs and NFC time deposits (robust to controls for anticipation effects and very low initial rates).
  - c) Weakening of pass-through to deposit rates is partly associated with higher financial sector concentration, more ample deposits relative to loan opportunities, and higher banking liquidity.
  - d) Using outstanding mortgage data as an example, pass-through effects on aggregate monetary policy transmission are heterogeneous across countries.

### Relation to the literature
- Builds on literature analyzing pass-through in the euro area and other European countries, and on studies exploiting within-country bank heterogeneity.
- Notes a meta-study finding average pass-through from monetary policy rates to bank lending rates around 0.8 (Gregor and Melecký, 2021).
- Cites recent studies of the post-pandemic hiking cycle with consistent findings: weaker pass-through in the euro area (Byrne and Foster, 2023), more sluggish pass-through to deposit rates (Messer and Niepmann, 2023), strong pass-through to NFC loans and early loan-rate increases (Lane, 2023a; 2023d), and weaker pass-through to O/N deposit rates than to time deposit rates (Lane, 2023c). Findings for non-euro area European economies are also noted.

### Data highlights and coverage
- Seven interest rate types: O/N and time deposits (households and NFCs), consumer loans, mortgages, NFC loans. Series generally refer to new business; outstanding mortgage rates are also collected.
- Sample: 30 European countries that are either in the euro area or have independent monetary policy (no official peg and not fully euroized).
- Data frequency: monthly; panel is unbalanced.
- Two thirds of countries have data on all seven interest rates (see Annex Tables referenced in the source).
- Some series differences across countries (e.g., universe of credit institutions vs subset, inclusion of non-profit institutions in household sector) exist but are judged too small to materially affect results.
- Complementary series: monetary policy rate, HICP and core HICP inflation, industrial production, banking sector concentration (Herfindahl–Hirschman index using bank assets), and loan-to-deposit ratio (proxy for financial sector liquidity).

### Empirical approach to stylized facts (pass-through measurement)
- Bank interest rate betas computed as the ratio of cumulative increase in bank interest rates to the cumulative increase in the policy rate.
- For each country, data are truncated from the month of the first rate hike until three months after the last hike (or the first rate cut or the end of sample, whichever is shorter). Annex Table A1 lists start and end dates for each country’s post-pandemic hiking cycle.

### Key stylized facts (preview)
- Heterogeneity across rate types:
  - Average pass-through highest for loans to NFCs, followed by time deposits; weakest for overnight deposits. Mortgage response lies between these.
  - Longer maturity can weaken link between policy and bank rates; mortgages often less responsive than NFC loans.
  - Weak pass-through to deposit rates, especially O/N deposits, consistent with bank market power in deposit markets; contrasts with hypothesis that longer duration weakens policy–bank rate link.
- Cross-country heterogeneity:
  - Significant dispersion across countries in both level and dispersion of pass-through.
  - Cross-country differences may reflect financial sector concentration, liquidity, profitable lending opportunities, and public policy (e.g., temporary mortgage interest rate caps).
- Sectoral differences:
  - Pass-through to NFC deposit rates generally exceeds pass-through to household deposit rates in nearly all countries, suggesting greater bank market power vis-à-vis households and stickier household deposits.

*Source: IMF Working Paper — Monetary Policy Pass-Through to Interest Rates (Introduction and related sections).*

### 4.2 The pass-through has been weaker this time, except to NFC loan rates

### 4.2 The pass-through has been weaker this time, except to NFC loan rates

### Comparison with previous tightening cycles: magnitude and pace
- The post-pandemic tightening cycle was generally more rapid and larger in magnitude than the comparator cycles:
  - Average cumulative policy rate increases in the post-pandemic cycle: 595bps.
  - Average cumulative policy rate increases in the comparator cycles: 231bps.
  - Pace of increase: around 35bps per month in the post-pandemic cycle, compared to 15bps per month during the comparator cycles.
- Method and samples:
  - For each country the comparator cycle is the previous tightening cycle with the largest policy rate increase covered by the data (e.g., 2005-2008 pre-GFC for the euro area, Poland, Romania, Sweden, UK; see Annex Table A1 and A4 for country-specific choices).
  - Results are broadly unchanged when restricting to EA-12 economies and when allowing pass-through to begin up to six months before actual policy rate hikes (anticipation effects).
- Key outcome:
  - Across countries, pass-through as measured by interest rate betas was generally weaker during the post-pandemic tightening cycle than in the comparator cycles — i.e., more and faster tightening was accompanied by weaker pass-through per percentage point increase in the policy rate.
  - Examples: pass-through to household O/N rates and mortgage rates has been generally smaller in the post-pandemic tightening cycle.

### Regression framework to control confounders
- Equation estimated in panel setting (summary):
  - Equation (1) relates month-over-month changes in a bank interest rate r_{i,t} to contemporaneous and lagged changes in policy rates, distinguishing hikes (T) and cuts (L), and allowing a dummy for the post-pandemic tightening cycle (d_{i,t-k}) so that pass-through during the post-pandemic tightening can differ (β^T + β^{TPP} for hikes).
  - Controls include contemporaneous and K lags of the 12-month log change in industrial production (∆IP) and core consumer price inflation (∆CPI), country fixed effects, and standard errors clustered at the country level.
  - Long-run pass-through is computed as the cumulative effect over K consecutive periods; K is set to 6 (results similar with longer lags).

### Estimated differences in long-run pass-through (post-pandemic vs previous cycles)
- The regression results confirm that pass-through is significantly weaker in the post-pandemic cycle than in previous tightening cycles, in both the full sample and among EA-12 countries, except for:
  - NFC loans in the full sample (differences not statistically significant at conventional levels).
  - NFC time deposits in both samples (no significant decline).
- Quantified average declines (across both samples):
  - Difference for HH and NFC O/N deposits: 0.2.
  - Difference for HH time deposits and mortgages: 0.4.
  - All differences above are statistically significant at the ten percent level.
- Interpretation:
  - A difference in pass-through of 0.2 implies that of a given policy rate hike, 20 percent less is passed on to bank interest rates.
- Robustness notes:
  - Results are broadly robust to including lagged levels and lagged changes of the bank interest rates, as well as year fixed effects.
  - Including the lagged change of the interest rate somewhat increases the long-run pass-through to lending rates.

### Speed of pass-through: slower overall, except NFC loan rates
- Approach:
  - Local projection (Jordà, 2005) impulse response functions (IRFs) estimate cumulative responses of bank rates to monetary policy hikes, distinguishing positive shocks (hikes) and negative shocks (cuts). Equation (2) implements these panel local projections with controls (∆IP, ∆CPI), country fixed effects, intermediate policy changes, and lagged ∆s_{i,t-1} terms; standard errors clustered by country.
  - A simple quantitative pace metric: peak response divided by the time to reach the peak. Peak is the largest significant response within six months (significance defined as within one standard deviation).
- IRF results:
  - IRFs show pass-through in the post-pandemic cycle has been weaker than in previous tightening cycles for most interest rates.
  - Exception: pass-through to NFC loan and NFC time deposit rates is similar between post-pandemic and previous cycles.
- Pace findings:
  - Overall the pace of pass-through has been slower in the post-pandemic cycle compared to earlier episodes, with caveats:
    - For NFC loans and time deposits: pass-through was slow initially but over time caught up to some extent to previous cycles.
    - For mortgage and O/N deposit rates: pass-through was slower and weaker, with no catch-up over time.
  - Figures 9 and 10 (panel and country-specific averages) confirm these pace results across the whole sample and the euro area. Statistical significance indicated at 99%, 95%, and 90% levels in country-average comparisons where noted.

### Banking competition, deposit volumes, and liquidity as determinants of pass-through
- Motivation and indicators:
  - Banking sector competition proxied by Herfindahl index of total assets (financial sector concentration).
  - Volume of household and NFC deposits relative to loans proxied by loan-to-deposit ratio (LTD).
  - Bank liquidity measured via LCR and excess reserves (bank deposits at central banks minus minimum required reserves, expressed in percent of total euro area MFI assets).
- Stylized facts:
  - Herfindahl index suggests bank concentration in Europe has increased modestly over time.
  - LTD has fallen over time, consistent with post-pandemic excess savings and sluggish lending recovery.
- Empirical strategy:
  - Estimate Eq. (1) augmented with interaction dummy d_{i,t-k} that equals one when country characteristic (concentration or LTD) is above the year-specific median; compare cumulative pass-through ∑β^T_k (low group) to ∑(β^T_k + β^{TA}_k) (high group) over K=6.
- Findings on concentration:
  - High concentration (lower competition) is associated with lower pass-through to some deposit rates in both the full sample and EA-12, though not all differences are statistically significant at the 10 percent level.
  - Differences in pass-through to NFC deposit rates are not significant at conventional levels in the EA-12 sample.
  - Results for pass-through to loans are non-conclusive or far from statistically significant, implying competition is a less important driver of lending rates.
- Findings on loan-to-deposit ratio:
  - A higher LTD is mostly associated with stronger pass-through to some deposit rates.
  - Three differences are statistically significant at the 10 percent level, with higher statistical significance in the euro area.
  - Differences in pass-through to time deposit rates are not significant in either sample.
  - The stronger role of LTD in the euro area is consistent with a more sluggish recovery and fewer profitable loan opportunities there.
- Liquidity results:
  - Cross-country correlations for the euro area show:
    - A statistically significant negative association between LCR and NFC O/N deposit betas.
    - Relationship between LCR and household deposit betas is negative but not significant.
    - Relationship between excess reserves and deposit betas is statistically insignificant at conventional levels (even if corrected for outliers).
    - No correlation between bank liquidity measures and loan rate betas (NFC or household).
  - Interpretation: higher bank liquidity can reduce incentives to compete for deposits and thereby weaken pass-through to deposit rates; effects on lending rates are ambiguous.
- Zero or negative starting policy rates:
  - Inclusion of dummies distinguishing increases from positive versus zero/negative starting policy rates reduces estimated differences in pass-through modestly. Quantitatively the effect of starting from zero/negative rates is small in the current setting.

*IMF Working Paper — Monetary Policy Pass-Through to Interest Rates — Section 4.2 (and related subsections) — INTERNATIONAL MONETARY FUND*

### 4.5 Pass-through to rates of existing mortgages weakened over time as the share

### 4.5 Pass-through to rates of existing mortgages weakened over time as the share

### Summary findings on mortgage pass-through
- Mortgages are the largest part of household debt in Europe, varying from about half of household debt in Hungary to more than 90 percent in the Netherlands.
- Since the GFC, the share of flexible-rate mortgages in new mortgages has decreased in many European countries, which reduces pass-through to the rates of outstanding mortgages, everything else equal.
- Flexible-rate mortgages are defined as mortgages with an interest fixation of less than a year, whereas fixed rate mortgages are defined as mortgages with interest fixation of above one year.
- Even fixed-rate mortgages are subject to repricing when the fixed term expires; pass-through decreases with higher average duration of fixed-rate mortgages.
- Cross-country variation in average fixed-rate durations is large:
  - The majority of mortgage rates are fixed for periods longer than ten years in Belgium.
  - In the UK, mortgages have much lower maturities (but are still classified as fixed rate).
- These cross-country differences imply very different pass-through to the rates of outstanding mortgages across countries.

### Heterogeneity in transmission and aggregate effects
- The extent of pass-through to the rates of outstanding mortgages, and the likely effect on monetary policy transmission, differ significantly across countries:
  - Some central, eastern and southeastern countries show mortgage costs that are more responsive to increases in policy rates.
  - However, a relatively low share of households with mortgages in some of those countries limits the aggregate impact, softening monetary transmission.
  - Countries with a high share of households with mortgages (e.g., the Netherlands) can experience muted transmission if pass-through to outstanding mortgage rates is low.
  - Countries with both a low share of households with mortgages and low pass-through see the least effects from policy rate changes.
- For some countries, strong pass-through combined with a high stock of mortgages implies large aggregate changes in household debt service costs.
  - The paper approximates changes in annual interest payments on mortgages by: the change in the interest rate on existing mortgages multiplied by the stock of outstanding mortgages at the beginning of the cycle.
  - Using this approximation, variation across euro area economies is large; households in Portugal experienced an increase of interest costs of more than 1.2 percent of GDP annually based on this approximation.

### Methodological notes relevant to mortgage results
- Data sources cited include ECB; National Central Banks; The European Mortgage Federation; and IMF staff calculations.
- For share of flexible-rate mortgages, the authors used 2012, 2022 or the closest year with data in the left-panel figure.
- For maturity of fixed-rate mortgages, data are reported as of 2023Q2 in the right-panel figure, with data for the Netherlands as of 2023Q1 and limited availability for other mortgage types in Greece.
- In quantifying aggregate debt service changes (Figure 18), the ending date for the right-panel series is August 2023.

### Implications for monetary policy and interpretation
- Pass-through to interest rates is an important aspect of monetary policy transmission; differences in strength and speed of pass-through across countries affect policy effectiveness and timing.
- In the post-pandemic tightening cycle, pass-through (relative to the change in policy rates) has been smaller and slower compared to the past, with nuances across instruments and countries.
- Slower pass-through implies longer lags in monetary policy transmission than in the past, but ultimately the same policy effects.
- Anticipation effects (some pass-through occurring before actual policy rate increases) and negative or zero initial rates at the start of the post-pandemic cycle could have contributed to weaker pass-through, but the results point to small effects from those factors.

### Suggested directions for future research (as stated)
- Revisit results once more data become available to account for potential lags in pass-through in the post-pandemic tightening cycle and further test robustness (including by using alternative measures of concentration).
- Compare pass-through between hiking and loosening cycles.
- Analyze pass-through to NFC loan rates in a more granular way.
- Conduct a more comprehensive analysis of the effects of monetary policy changes in conjunction with deposit and loan volumes, to complement pass-through analysis.
- Study determinants and effects of pass-through in partially euroized countries, where pass-through to domestic-currency deposits and loans may be interdependent with rates on euro-denominated deposits and loans.

*IMF Working Paper excerpt (section 4.5) — Monetary Policy Pass-Through to Interest Rates*

### Annex II. Additional Charts and Results

### Annex II. Additional Charts and Results

### Pass-Through in Post-Pandemic Relative to the Comparator Cycle
- Pass-through computed starting from six months before first rate hike.
- Note: Interest rate betas during the post-pandemic cycle expressed as percent of the corresponding betas in the comparator cycle as in Figure 5, but assuming that anticipation effects imply that pass-through at least for some bank rates begin up to six months before the actual policy rate hikes.

### Estimated Pass-Through with Different Types of Fixed Effects
- Note: This figure covers the entire sample for all periods and does not include any interaction terms.
- Axis/scale ticks shown in the figure: 0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 0.8, 0.9, 1
- Rate categories and groupings shown: Loans; O/N deposits; Time deposits; Mortgages; O/N deposits; Time deposits; NFC; HH; Europe; Euro Area.

### Estimated Pace of Pass-Through by Country
- Note: Pace of pass-through estimated based on country-by-country impulse response functions. The pace of pass-through which is the peak response divided by the time it takes to reach the peak.
- Axis/scale ticks used in panels: 0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 0.8 (and in some panels up to 0.9).
- Panels and shown country lists include:
  - Pace of pass-through to NFC loan rates (pp/month): Austria, Belgium, Czech Republic, Estonia, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Romania, Serbia, Slovak Republic, Slovenia, Spain, United Kingdom.
  - Pace of pass-through to mortgage rates (pp/month): Austria, Belgium, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Romania.
  - Pace of pass-through to NFC time deposit rates (pp/month): Austria, Belgium, Cyprus, Czech Rep., Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovenia, Spain, Sweden, United Kingdom.
  - Pace of pass-through to HH time deposit rates (pp/month): Austria, Belgium, Cyprus, Czech Rep., Estonia, Finland, France, Germany, Hungary, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Romania, Slovak Republic, Spain, Sweden, UK.
  - Pace of pass-through to NFC O/N deposit rates (pp/month): Austria, Belgium, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovenia, Spain, Sweden, United Kingdom.
  - Pace of pass-through to HH O/N deposit rates (pp/month): axis ticks shown include 0, 0.05, 0.1, 0.15, 0.2, 0.25; previous tightening episodes vs. post-pandemic tightening episode comparison annotated in panels.

### Post-Pandemic Interest Rate Betas and Country Characteristics
- Note: Pass-through calculated as the ratio of cumulative change in interest rates relative to cumulative changes in the policy rate from month of first rate increase to three months after last rate increase (or the first rate cut or the end of the sample, whichever is shorter) in the post-pandemic tightening cycle.

### Estimated Policy Pass-Through: Post-pandemic Tightening vs. Previous Tightening Cycles (controlling for different pass-through at zero or negative policy rates)
- Note: Figure shows differences between post-pandemic and previous tightening cycles as estimated in analogy to Eq. (1) but with inclusion of two dummies for tightening in the regression model - one capturing increases from positive policy rates and one capturing increases from zero or negative rates.
- Axis/scale ticks shown in the figure: -0.45, -0.4, -0.35, -0.3, -0.25, -0.2, -0.15, -0.1, -0.05, 0
- Rate categories compared: NFC time deposits; HH time deposits; NFC O/N deposits; HH O/N deposits; Mortgages; Consumer loans.
- Labels shown for specifications: Baseline; Increase from positive policy rate.

*Source: Annex II. Additional Charts and Results, "Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries", Working Paper No. WP/2024/009*

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_Source: https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024009-print-pdf.pdf_