We test three hypotheses concerning the impact of loan market competition on euro area banks’ loan and deposit rates. First, we examine the effect of loan market competition on the level on bank loan and deposit rates; second, using a panel error-correction model (ECM) we estimate the effect of loan market competition on the long-run equilibrium pass-through of bank interest rates to changes in corresponding market interest rates; third, we also test the impact of competition in the loan market on the immediate adjustment of bank interest rates to changes in market interest rates
