Asymmetric Adjustment of Commercial Bank Interest Rates in the Euro Area : An Empirical Investigation into Interest Rate Pass-Through

Our study extends the traditional pass-through literature by incorporating an error correction mechanism that is based on cointegration analyses allowing for structural breaks and symmetric as well as for a variety of asymmetric adjustment mechanisms. While some results of earlier pass-through studies regarding an asymmetric monetary transmission mechanism within the Euro area are confirmed, our study provides evidence that not only the speed of adjustment differs but that the nature of the adjustment process itself is heterogeneous across countries. Therefore, our analysis provides a deeper insight into the differential workings of the financial markets across Europe