Global Savings, Investment, and World Real Interest Rates

In this paper, we investigate the effect of loan market competition on euro area banks’ retail pricing behaviour and focus, in particular, on its effect on the adjustment of retail bank interest rates to changes in market interest rates. Given the prominent role of the banking sector in the euro area’s financial system, it is of significant importance for the ECB to monitor the degree of competitive behaviour in the euro area banking market. A more competitive banking market is expected to drive down bank loan rates, adding to the welfare of households and enterprises. In addition, in a more...