ECB Monetary Policy Passthrough to Bank Interest Rates During Tightening: Republic of Kosovo

This paper analyzes the transmission of ECB policy rate changes to bank interest rates in Kosovo during the 2022-23 tightening cycle. While both lending and deposit rates increased, the passthrough was more limited compared to the euro area and regional peers.
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Volume/Issue: Volume 2025 Issue 004
Publication date: January 2025
ISBN: 9798400299162
$15.00
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Topics covered in this book

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Banks and Banking , Finance , Inflation , Monetary policy transmission , interest rates , banking sector , euroization , financial development , Kosovo , ECB monetary policy Passthrough , ECB policy rate change , ECB policy rate Passthrough , ECB Policy rate pass-through , Central bank policy rate , Deposit rates , Financial sector development , Inflation , Financial inclusion , Europe

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Summary

This paper analyzes the transmission of ECB policy rate changes to bank interest rates in Kosovo during the 2022-23 tightening cycle. While both lending and deposit rates increased, the passthrough was more limited compared to the euro area and regional peers. Three key factors explain this limited transmission: Kosovo's stage of financial development, high banking sector liquidity, and significant bank concentration.

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