A ridge bootstrap method for analyzing APT effects on the mortgage loan market

Significantly positive asymmetric price transmission (APT) effects are concluded on the Swedish mortgage loan market. This finding was established based on unique banking data in combination with our newly developed econometric method which is insensitive to the banks' variations in liquidity and capital costs. It is established that there is a higher propensity for the bank to rapidly and systematically increase its fixed mortgage interest rates for customers subsequently to an increase in its borrowing costs, compared with the propensity for the bank to decrease its customers' mortgage rates subsequently to a corresponding borrowing cost decrease.

► Positive asymmetric price transmission effects are concluded on the mortgage market. ► Unique banking data of Swedish banks' financing costs is accessed in this study. ► A new ridge bootstrap model is built to filter out risk-premium distortion. ► Mortgage rates grow more in magnitude to borrowing costs increases than to decreases. ► A unique contribution is given both in terms of data and method in this paper.