Interest rate transmission in Greece: Did EMU cause a structural break?

摘要

We examine the transmission process of the policy rate to the lending and deposit rates in Greece for the period 1996-2004 within bivariate cointegration and error correction framework. A significant structural break takes place with the accession of Greece into the European Monetary Union (EMU) in 2001. Then, as a consequence of the common monetary policy the bank rates become much more responsive to the policy rate in terms of impact multipliers and speed of convergence to the equilibrium rates. Lower, less volatile and with fast dynamic convergence properties interest rates imply a better economic climate, a necessary though not sufficient condition for higher investments and growth. However, the process is still not complete even after the accession into the EMU. This means that the positive effects of the monetary policy have not fully arrived at the debtors and investors yet.