Beyond the Interest Rate Pass-through: Monetary Policy and Banks Interest Rates during the Effective Lower Bound

We investigate whether monetary policy influences the retail interest rates in the Euro Areawhen the policy rate reaches the effective lower bound. We estimate a panel-Error CorrectionModel that accounts for potential heterogeneities in the transmission of monetary policy. Theanalysis disentangles alternative non-standard measures implemented by the ECB. We findthat unconventional measures have influenced banking interest rates beyond the pass-throughof the current and expected policy rate. These effects are driven by liquidity provisions in corecountries and by covered bond purchase programmes in peripheral ones.