Economic Watch: What are the determinants of loan interest rates in EMU countries?

The estimates carried out reveal the heterogeneous transmission of monetary policy in the European Monetary Union (EMU) via the analysis of the determinants of retail credit interest rates. All the countries form their prices based on the official rates, the short and long-term ends of the interest-rate curve and the sovereign risk premiums. Except in the case of France, where the prices of all its portfolios are formed taking into account short and long term parts of the interest-rate and risk premium curves, the other countries tend to have one or more portfolios where there is no reference either to the short or the long end, or to the sovereign risk premium. Therefore, the transmission of monetary policy to loan interest rates is not homogeneous in Europe.

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