(Extract from page 60 of BIS Quarterly Review, September 2013)
We collected data on interest rates for France, Germany, Italy, Spain, the United Kingdom and the United States. Coverage starts in January 2002 (except for Spain and France, for which it starts in April 2002 and January 2003, respectively) and ends in May 2013 for the United Kingdom and the euro area countries and in March 2013 for the United States. All rates are annualised.
The US policy rate is the federal funds target rate up to December 2008 and the midpoint of the target range thereafter. For the United Kingdom, we use the bank rate as published by the Bank of England. For the euro area, we use the main refinancing rate up to the introduction of fixed rate full allotment in October 2008 and the deposit facility rate thereafter (Beirne (2012)). The overnight interbank rate is the euro overnight index average (EONIA) for the euro area countries, the effective federal funds rate for the United States and overnight GBP Libor for the United Kingdom. The source for the secondary market one-year sovereign bond yield for the United Kingdom and the euro area countries is Bloomberg. The yield for the United States is obtained from the Federal Reserve, and is defined as the nominal constant maturity yield. Both sources provide daily data which are converted to monthly frequency by averaging daily observations.
Collecting lending rates was more challenging, since reporting practices differ across countries, and definitions are not homogeneous. We tried to use rates that match as closely as possible. For the euro area countries, we collected monthly data from the ECB that refer to the interest rate on loans over €1 million, other than revolving loans and overdrafts, convenience and extended credit card debt to non-financial firms for new businesses (see ECB (2003) for further details). The series starts in January 2003, and we used national central banks' data to backdate it further.
For the United States, data come from the Federal Reserve Survey of Terms of Business Lending for commercial and industrial loan rate spreads over the target federal funds rate, extended during the reporting period by loan size (see Brady et al (1998) for further details). The data are available only at quarterly frequency and were thus linearly interpolated so that we could perform the analysis using monthly data. We use the reported spread for commercial and industrial loans over $1 million. Summing the reported spread over the target federal funds rate with the target rate itself gives us the effective loan rates in the United States.
For the United Kingdom, data are obtained from the Bank of England, which reports the monthly average across monetary and financial institutions of the weighted average interest rate on other loans and new advances between £1 million and £20 million to private non-financial firms (see Reynolds et al (2005) for further details). The series starts in January 2004, and we backdated it using the fixed lending rate on outstanding loans for non-financial firms.
Information on the maturity of the loans included in the basket is more scant. The United States reports the average maturity of the loans included in the basket, which was less than 1.5 years in May 2013. It also indicates that the average number of months after the last rate fixation was around 10. For the United Kingdom, Al-Dejaily et al (2012) state that over 90% of new loans had an original rate fixation period of less than one year. For the euro area, no explicit information on the maturity is available, but the original rate fixation is reported to be less than one year.
1 We did not backdate the data for France since the national source data shows a break when joined with the ECB data.