Regional interest rate pass-through in Italy

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. The main findings suggest that the mark-ups for the lending rates that banks charge are generally higher in the South than in the North. Moreover, the empirical results indicate that the pass-through tends to be longer in Southern regions. Furthermore, little support is found for the hypothesis that regional banks react asymmetrically when adjusting their loan rates when these are above or below equilibrium levels, but some evidence supporting an upward rigidity in the regional deposit rates is detected