Regional Interest Rate Pass-Through in Italy

Abstract

Montagnoli A., Napolitano O. and Siliverstovs B. Regional interest rate pass-through in Italy, Regional Studies. This paper estimates the pass-through and speed of adjustment of Italian regional interest rates to changes in the money market rate for the period 1998Q1–2009Q4. The main findings suggest that the mark-ups for the lending rates that banks charge are generally higher in the South than in the North. Moreover, the empirical results indicate that the pass-through tends to be longer in Southern regions. Furthermore, little support is found for the hypothesis that regional banks react asymmetrically when adjusting their loan rates when these are above or below equilibrium levels, but some evidence supporting an upward rigidity in the regional deposit rates is detected.

Montagnoli A., Napolitano O. and Siliverstovs B. 意大利的区域利率转嫁，区域研究。本文评估 1998 年第一季至 2009 年第四季之间，意大利区域利率依货币市场利率的改变，转嫁、调整的速度。主要的研究发现指出，一般而言，银行索取的贷款利率的涨幅，南方高于北方。此外，经验结果显示，南方区域的转嫁倾向更长。再者，本研究发现鲜少的证据，支持区域银行在贷款利率高于或低于均衡标准而进行调整时，具有不对称回应的假说，但却发现部分的证据，支持区域存款利率中的向上固着性。

Montagnoli A., Napolitano O. et Siliverstovs B. La transmission des taux d'intérêt régionaux en Italie, Regional Studies. Cet article évalue la transmission et la vitesse de rajustement des taux d'intérêt régionaux italiens aux changements intervenus sur le marché monétaire pour la période allant du 1er trimestre de 1998 jusqu'au 4e trimestre de 2009. Les principaux résultats laissent supposer que les taux de marge des taux de prêt bancaires sont plus élevés dans le Sud qu'ils ne le sont dans le Nord. Qui plus est, les résultats empiriques indiquent que la transmission a tendance à prendre plus de temps dans les régions méridionales. En outre, il y a très peu d'appui pour l'hypothèse que les banques régionales réagissent de façon asymétrique au moment où elles ajustent leurs taux de prêt quand ces derniers sont au-dessus de ou au-dessous de leur niveau d’équilibre, alors qu'il est à constater des résultats à l'appui d'une rigidité à la hausse des taux de dépôt régionaux.

Montagnoli A., Napolitano O. und Siliverstovs B. Regionale Zinsreaktionen in Italien, Regional Studies. In diesem Beitrag werden die Höhe und Geschwindigkeit der Anpassung der italienischen Zinssätze an die Veränderungen des Geldmarktsatzes im Zeitraum vom ersten Quartal 1998 bis zum vierten Quartal 2009 geschätzt. Aus den Hauptergebnissen geht hervor, dass die Aufschläge für die von den Banken erhobenen Darlehensraten im Süden generell höher ausfallen als im Norden. Darüber hinaus lassen die empirischen Ergebnisse darauf schließen, dass die Zinsreaktion in südlichen Regionen tendenziell länger ausfällt. Ebenso finden sich wenige Belege für die Hypothese, dass regionale Banken bei der Anpassung ihrer Darlehenszinsen asymmetrisch reagieren, wenn sich diese ober- oder unterhalb des Gleichgewichts befinden; allerdings finden sich einige Anzeichen für eine Aufwärtsrigidität der regionalen Zinssätze für Einlagen.

Montagnoli A., Napolitano O. y Siliverstovs B. Traspaso regional de los tipos de interés en Italia, Regional Studies. En este artículo calculamos el traspaso y la rapidez del ajuste de los tipos de interés regionales en Italia a los cambios en el tipo del mercado monetario para el periodo del primer trimestre de 1998 al cuarto trimestre de 2009. Los resultados principales indican que los márgenes para las tasas de préstamos que los bancos cobran son generalmente más altos en el sur que en norte. Además, los resultados empíricos indican que el traspaso tiende a ser más largo en las regiones del sur. Asimismo observamos poco apoyo para la hipótesis de que los bancos regionales reaccionen de forma asimétrica cuando ajustan sus tasas de préstamos si están por encima o por debajo de los niveles de equilibrio; no obstante, detectamos algunas evidencias que apoyan una rigidez ascendente en los tipos de depósito regionales.

• Interest rates pass-through
• Monetary policy
• Error correction model

• 利率转嫁
• 货币政策
• 错误的相关模型

• Transmission des taux d'intérêt
• Politique monétaire
• Modèle à correction d'erreurs

• Zinsreaktion
• Währungspolitik
• Fehlerkorrekturmodell

• Traspaso de los tipos de interés
• Política monetaria
• Modelo de corrección de errores

JEL classifications:

• E43
• E50
• R11

Acknowledgements

This research was initiated while the first co-author visited the KOF Swiss Economic Institute at ETH Zurich, Switzerland. The stimulating research environment and the hospitality of the receiving institution are gratefully acknowledged. The paper benefited from the comments of Gabe de Bondt, Bob Hart and Ugo Marani as well as the participants at: the Banking – Seeking a New Paradigm conference (Winchester, UK); the 53rd Annual Conference of Italian Economic Association (Matera, Italy); the 6th IFABS 2014 Alternative Futures for Global Banking: Competition, Regulation and Reform conference (Lisbon, Portugal); and the 54th ERSA Annual Conference (St Petersburg, Russia). The help provided by Giovanni Iuzzolino and Gennaro Corbisiero from the Bank of Italy with acquiring the data is gratefully acknowledged. Any remaining errors are sole responsibility of the authors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. See Rodríguez-Fuertes (2005) for a survey of the literature.

2. Additional information on the evolution of the number of banks in Italy and the associated regional differences in branch density is provided by Alessandrini et al. (2009).

3. The composition of the firms by legal status at regional level are individual firms followed by partnership firms and corporations.

4. Some economic sectors have a higher propensity to employ irregular workers. For instance, the agriculture and the tertiary sectors display a high concentration (33% and 16%, respectively) (Gobbi and Zizza, 2007). Ellis (1999) reports that in the Southern regions the share of the unofficial economy accounts to about 30% of GDP and more than 30% of the workforce employment. An important regional characteristic is the level of criminality attributed to organized crime, which is higher in the South than in the North.

5. On this point, see Marullo Reedz (1990).

6. All data are stored in the Bank of Italy's historical statistical database (BIP).

7. Ordinary customers are individuals or groups of individuals acting as consumers or as producers of goods and non-financial services exclusively intended for their own final consumption and small-scale market producers (Bank of Italy, 2003).

8. To save space, results are not reported here, but they are available from the authors upon request.

9. The model assumptions were verified using a battery of regression diagnostic tests, such as the LM test of no residual autocorrelation up to the first and fourth orders (Godfrey, 1978), the LM test of no ARCH effects in the model residuals (Engle, 1982), the Doornik and Hansen (2008) test of normally distributed residuals, the White (1980) test for heteroskedasticity based on the original and squared regressors, and the Ramsey (1969) model specification test. There is no evidence of serious and systematic violations of model assumptions. For the sake of brevity, outcomes of model misspecification tests are not reported but are available from the authors upon request.

10. The importance of deposits has diminished for both the saver and the banks. This can be attributed to the process of securitization, which took place in the last decades. For savers, bank deposits become only an instrument to keep their cash for day-to-day activities rather than an instrument seeking a yield. Moreover, securitization led banks to replace deposits with other financial securities. This resulted in a lower competition among banks for deposits.

11. In order to rule out the possibility of a spurious regression, an anonymous referee suggested verifying the existence of the long-run relationship between the variables in question using the bounds testing procedure of Pesaran et al. (2001). The testing procedure of Pesaran et al. is more conservative as it is based on a broader set of assumptions regarding the order of integration of modelled variables. The application of the bounds testing procedure indicates that the null hypothesis of no level relationship between administered interest rates and the money market interest rate can be decisively rejected for long-term and deposit interest rates for each Italian region. for short-term interest rates, the corresponding null hypothesis can be rejected in all but four regions (LIG, LOM, SIC, VALD) at the usual significance levels. The likely reason for such an outcome is that it takes longer to accommodate deviations from the long-run relationship in these four regions, as manifested in the relatively smaller values of the adjustment coefficient estimates (Table 3). As a consequence, a longer time span is necessary to detect the long-run relationship between the variables of interest in these four regions, if one applies the bounds testing approach for this purpose.