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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

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Volume 24 (2020)

Nonlinear interest rate-setting behaviour of German commercial banks

Ludwig Heinzelmann / Martin Missong
  • University of Bremen, Faculty of Business Studies and Economics, Enrique-Schmidt-Str. 1, 28359 Bremen, Germany
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2019-08-09 | DOI: https://doi.org/10.1515/snde-2017-0103


We quantitatively analyse the interest rate-setting behaviour of German commercial banks during the period 2003–2014, using nonlinear (smooth transition) cointegration approaches. Our empirical results reveal principles applied by commercial banks in (re-)gaining margins in the aftermath of the financial crisis. We substantiate our findings using economic arguments from a bank management perspective. As our study contributes to a better understanding of the pass-through mechanism from market to commercial banks’ customer interest rates, the results will also be relevant to meaningful assessments of the effectiveness of monetary policy measures.

Keywords: banking; financial crisis; interest rate pass-through; interest rate-setting; smooth transition regression models

JEL Classification: C58; E43; G21


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Published Online: 2019-08-09

Citation Information: Studies in Nonlinear Dynamics & Econometrics, 20170103, ISSN (Online) 1558-3708, DOI: https://doi.org/10.1515/snde-2017-0103.

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