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Market concentration and market power of the Swedish mortgage Sector – a wavelet panel efficiency analysis

Market concentration and market power of the Swedish mortgage Sector – a wavelet panel efficiency... AbstractBased on a panel wavelet efficiency analysis, we conclude that there is a systematic pattern of positive asymmetric price transmission inefficiencies in the interest rates of the largest Swedish mortgage lenders. Thus, there seems to be a higher propensity for mortgage lenders to swiftly increase their customers’ mortgage interest rates subsequent to an increase in its borrowing costs, than to decrease their customers’ mortgage rates subsequent to a corresponding decrease in the cost of borrowing. A unique contribution is our proposed wavelet method which enables a robust detection of positive asymmetric price transmission effects at various time-frequency scales, while simultaneously controlling for non-stationary trends, autocorrelation, and structural breaks. Since traditional time-series analysis methods essentially implies that several wavelet time scales are aggregated into one single time series, the blunt traditional error correction analysis totally failed to discover APT effects for this data set. In summary, using the wavelet method we show that even though the customers in the end finally will benefit from decreases in the mortgage lenders’ financing costs, the lenders wait disproportionally long before the customers’ mortgage rates are decreased. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Market concentration and market power of the Swedish mortgage Sector – a wavelet panel efficiency analysis

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References (60)

Publisher
de Gruyter
Copyright
©2018 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2016-0021
Publisher site
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Abstract

AbstractBased on a panel wavelet efficiency analysis, we conclude that there is a systematic pattern of positive asymmetric price transmission inefficiencies in the interest rates of the largest Swedish mortgage lenders. Thus, there seems to be a higher propensity for mortgage lenders to swiftly increase their customers’ mortgage interest rates subsequent to an increase in its borrowing costs, than to decrease their customers’ mortgage rates subsequent to a corresponding decrease in the cost of borrowing. A unique contribution is our proposed wavelet method which enables a robust detection of positive asymmetric price transmission effects at various time-frequency scales, while simultaneously controlling for non-stationary trends, autocorrelation, and structural breaks. Since traditional time-series analysis methods essentially implies that several wavelet time scales are aggregated into one single time series, the blunt traditional error correction analysis totally failed to discover APT effects for this data set. In summary, using the wavelet method we show that even though the customers in the end finally will benefit from decreases in the mortgage lenders’ financing costs, the lenders wait disproportionally long before the customers’ mortgage rates are decreased.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Sep 25, 2018

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