Effects of the financial crisis and low interest rate environment on interest rate pass-through in Czech Republic, Hungary and Romania

Abstract In order for monetary policy’s interest rate channel to operate smoothly and effectively, the relevant retail rates of real economy should react quickly follow movements prime rate. It has been observed that this connection weakened since financial crisis it was suggested so called Weighted Average Cost Liabilities (WACL) might be a better proxy banks’ marginal costs than or interbank study WACL Czech Republic, Hungary Romania is calculated by applying cointegration tests ARDL models. I examined whether their long-run relationships with loan are more stable. Results: 1. Using instead yields slightly stable long-term rates, proved somewhat 2. The pass-through efficient household in all three countries, but only corporate rates. 3. results suggest central banks can effectively influence commercial financing even low environment, although cost represents one component other components offset changes