Lending rate rigidity weakens eurozone monetary policy – BdF paper

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The rigidity of eurozone banks’ lending rates has significantly weakened monetary policy pass-through, a working paper published by the Banque de France finds.

In Downward interest rate rigidity, Grégory Levieuge and Jean-Guillaume Sahuc present a microfinance model where eurozone banks face asymmetric costs when adjusting their lending rates.

In particular, the model simulates the recent history of changes in the eurozone’s business and mortgage lending rates. They find that these conditions

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