INTERBANK INTEREST RATE TRANSMISSION IN THE BALTIC COUNTRIES
INTERBANK INTEREST RATE TRANSMISSION IN THE BALTIC COUNTRIES

Summary/Abstract: Integration process, harmonisation of bank legislation and mutual economic interdependence among European countries contribute to similar evolution of several financial indicators in the European Union. Current financial and economic crisis has revealed that some indicators evolved similarly only in short run and their symmetry among countries was not justified. This was the case of e.g. bond interest rates. However, we supposed that interbank interest rates reflected mutual transmission among the Baltic countries and the European Union in long run. We wondered whether this symmetry was not shattered by the recent financial and crisis. This assumption has not been confirmed using the vector error correction model. Our results show that interbank interest rates transmission was maintained even during the crisis. In addition, this transmission in the Baltic countries was significant also due to fixed exchange rate regimes which they applied. The paper was elaborated within the project VEGA 1/0973/11.

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