Bank Lending Rates and Financial Structure in Italy: A Case Study

IMF Working Papers, April 1, 1995

Source details

Canonical URL: Bank Lending Rates and Financial Structure in Italy: A Case Study

Discusses the relation between the financial structure and the determination of bank lending rates in Italy.
Notes that the high degree of stickiness of bank lending rates observed in Italy in the past was related to constraints on competition within the banking and financial markets.
Examines the effects on the lending rate determination process of the sweeping financial liberalization process that characterized the last few years.
Discusses the role of the discount rate in speeding up the adjustment process of bank interest rates, and the pros and cons of its possible indexation.

Empirical analysis uses microeconomic (individual bank) data for a group of 63 Italian banks operating in locally different financial environments.
The microeconomic approach allows identification of aspects of the relation between financial structure and lending rate stickiness that were not highlighted in previous studies.
Emphasis on linkages among financial structure, local financial environments, competition constraints, and observed rate stickiness.

Effect of financial liberalization on the lending rate determination process.
Role of the discount rate in accelerating the adjustment of bank interest rates.
Pros and cons of indexation of the discount rate.
Implications for competition within banking and financial markets.

Subjects: Bank credit, Banking, Commercial banks, Discount rates, Financial institutions, Financial markets, Financial services, Money, Money markets, Treasury bills and bonds
Keywords: Africa, Bank credit, Commercial banks, determination process, discount rate, Discount rates, financial structure, lending rate, money market, money market rate, Money markets, rate stickiness, stickiness in Italy, treasury bill, treasury bill rate, Treasury bills and bonds, WP