Regional interest rate pass-through in Italy

Abstract

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. Our main findings suggest that the markup for the lending rates that banks charge are generally higher in the South than in the North. Moreover, our results indicate that the pass-through tends to be longer in Southern regions. We find little evidence supporting the hypothesis of asymmetric adjustment in the lending rates, but detect some evidence supporting upward rigidity in the regional deposit rates.