Integration Benefits on EU Retail Credit Markets – Evidence from Interest Rate Pass-through

Lending and borrowing interest rates are often slow to adjust to changing capital market conditions. This paper argues that national differences of the pass-through speed in the EU can be regarded as a retail-oriented indicator of financial integration. Based on an ECB database the speed of interest rate adjustments for different markets and countries is measured showing a considerable fragmentation of markets. Simulations show how much consumers in some countries could gain from a convergence of adjustment speed on the fastest levels. JEL-Classification: G 15, F 23, E 43