scholarly journals Bank heterogeneity in interest rate pass-through: A panel evidence of Pakistan

2021 ◽  
Vol 17 (2) ◽  
pp. 107-132
Author(s):  
Abdul Rahman Nizamani ◽  
Zulkefly Abdul Karim ◽  
Mohd Azlan Shah Zaidi ◽  
Norlin Khalid
Keyword(s):  
Interest Rate ◽  
Commercial Banks ◽  
Banking Sector ◽  
Pooled Mean Group ◽  
Competition Level ◽  
Excess Liquidity ◽  
Dynamic Heterogeneous Panel ◽  
Pass Through ◽  
The Interest Rate ◽  
Heterogeneous Panel

This article examines the role of bank-level characteristics in determining the nature of interest rate pass-through from monetary policy rates to commercial banks’ lending rates in Pakistan. Several bank-level factors, namely market size, liquidity, capitalisation, profitability, and competition level, were used in analysing the pass-through mechanism. This study utilised a dynamic heterogeneous panel technique, namely the Pooled Mean Group (PMG) estimation for the sample of 12 private commercial banks, over the time span 2003:Q2 to 2015:Q4. Banks of smaller size, large capital, and higher liquidity were significantly affecting the interest rate pass-through procedure. Thus, to improve monetary policy’s transmission mechanism, Pakistan’s central bank should limit bank capitalisation and draw out excess liquidity from the banking sector.

scholarly journals THE DETERMINANTS OF INTEREST RATE SPREAD AMONG COMMERCIAL BANKS IN KENYA

2017 ◽  
Vol 2 (5) ◽  
pp. 29
Author(s):  
Leah Njoroge ◽  
Mercy Warui ◽  
Catherine Mbogo ◽  
Margaret Chiera ◽  
Dr. Chogii
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Market Structure ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Banking Sector ◽  
Unique Contribution ◽  
High Interest Rate ◽  
Interest Rate Spread ◽  
The Interest Rate

Purpose: To establish the determinants of interest rate spread among commercial banks in Kenya. Methodology: The study utilized a descriptive survey research design. Findings: The results indicated that the commercial banking sector has witnessed a gradual rise in the Interest rate spread. Results also showed that the mean of market structure has been fluctuating with year (2010) being the lowest with mean of 4 and year (2012) being the highest with mean 12. Results also showed that there was no regulation from the year (2005) to the year (2009) but it was later adopted whereas regulations shoot steadily to mean of 1.0 in the year (2009) and remained in the same level the rest of the years. The regression results indicate that there is a positive and significant relationship between market structure, credit risk and interest spread. The regression results also indicated that there is a positive but insignificant relationship between access to information and interest spread. Further, the results indicated that there is a negative and significant relationship between regulation and interest spread. Unique contribution to theory, practice and policy: The study is important to the management of Commercial banks as it will provide an insight on the factors influencing interest rate spread among commercial banks in Kenya. The results of this study will provide information to policy makers and other stakeholders in the financial sector (especially the banks) to come up with strategies that help in dealing with the high interest rate spread experience in the banking sector and thus improve on the financial performance of the organisations. It may be used as a tool for persuading commercial banks to reduce their interest rates spread and hence increase their volume of business, which of course would compensate the loss in the interest rate spread. The study will also be invaluable to the government and CBK. This is because the monetary policy framework of Central Bank of Kenya and its implementation will be guided by a need to ensure, among others: realistic interest rate spreads that encourage financial deepening and a safe, sound, efficient and competitive banking system through discreet risk management. These findings therefore might influence the effectiveness of economic policies. The research results will also be important to scholars and researchers as it will add to the existing pool of knowledge.

scholarly journals Nonlinear interest rate-setting behaviour of German commercial banks

2019 ◽  
Vol 24 (3) ◽  
Author(s):  
Ludwig Heinzelmann ◽  
Martin Missong
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Smooth Transition ◽  
Bank Management ◽  
Management Perspective ◽  
Policy Measures ◽  
Pass Through ◽  
The Interest Rate ◽  
Effectiveness Of Monetary Policy

AbstractWe quantitatively analyse the interest rate-setting behaviour of German commercial banks during the period 2003–2014, using nonlinear (smooth transition) cointegration approaches. Our empirical results reveal principles applied by commercial banks in (re-)gaining margins in the aftermath of the financial crisis. We substantiate our findings using economic arguments from a bank management perspective. As our study contributes to a better understanding of the pass-through mechanism from market to commercial banks’ customer interest rates, the results will also be relevant to meaningful assessments of the effectiveness of monetary policy measures.

Impact of Interest Rate Changes on the Profitability of four Major Commercial Banks in Pakistan

2014 ◽  
Vol 4 (1) ◽  
pp. 142 ◽  
Author(s):  
Waseem Ahmad Khan ◽  
Abdul Sattar
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Pearson Correlation ◽  
Correlation Method ◽  
Economic Stability ◽  
Independent Variable ◽  
The Interest Rate ◽  
The Impact

The core objective of this project is to analyze the impact of interest rates changes on the profitability of commercial banks being operated in Pakistan by examining the financial statements of four major banks during 2008 to 2012. Like the efficiency of banking sector is considered most important for economic growth, monetary policy implementation and macro-economic stability. From the past few years, interest spread of banking sector of Pakistan is rising. As a result variations in the interest rate depress the savings and investment and on the other hand it increases the efficiency of banks’ lending. In this paper interest rate is an independent variable and bank profitability is a dependent variable. To examine the impact of interest rate changes on the profitability of commercial banks in Pakistan, Pearson correlation method is used in this study. As a result it is found that there is strong and positive correlation between interest rate and commercial banks’ profitability. It means if the value of interest rate is increases/decreases then as result value of banks’ profitability will also increases/decreases.

Voyage of Indian Banking Sector: 1979-2007

2010 ◽  
Vol 6 (4) ◽  
pp. 243-252
Author(s):  
Bhaskar Birajdar
Keyword(s):  
Interest Rate ◽  
Commercial Banks ◽  
Banking Sector ◽  
Monopolistic Competition ◽  
Banking System ◽  
Foreign Banks ◽  
Return On Assets ◽  
Reform Period ◽  
The Interest Rate ◽  
State Of Affairs

Observing through the voyage of India Banking Sector, it could be concluded that Indian banking system is operating under competitive state of affairs and earns revenues as if under monopolistic competition, despite not depending on traditional source of fund in the form of deposits as profitability, i.e., return on assets are increasing and approaching towards industry ratio. But still foreign banks functioning in India are on a higher plane with respect to its performance in comparison with other bank groups. Costs of deposits and return on advances of all scheduled commercial banks have declined in the post reform period. However, return on advances was approaching closer to industry average showing competition amongst the banks in making profit on the interest rate front.

scholarly journals The Investment and Net Interest Margin: Case Study Commercial Banks in Kosovo

2016 ◽  
Vol 1 (2) ◽  
pp. 117
Author(s):  
Fidane Spahija
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Developed Countries ◽  
Economic Sectors ◽  
Net Interest Margin ◽  
Foreign Governments ◽  
The Interest Rate ◽  
Interest Margin

In Kosovo, but in all developing countries, the foreign investment is the locomotive of the country that considered as the most important economic sectors. In general it can be concluded that most of the investment originates from developed countries and that these investments return to these places. Origin of investments in Kosovo mainly comes from countries such as Austria, Germany, Slovenia, Great Britain, Switzerland, Turkey, the Netherlands, Albania, Serbia, USA, France, Macedonia, Croatia, Cyprus, Norway, Italy, Greece etc. The banking sector in Kosovo has been very attractive to the foreign investors. A total of nine commercial banks, seven are foreign owned. Foreign investments are primarily generated as investments in shares of foreign shareholders from different countries of the world. Investments in securities have increased by the banking sector in 2014. With the change of the interest rate it has also changed net interest margin of the banking sector. Interest on loans and deposits has continued to decline. Especially interest rates on deposits in 2014 have fallen to 1. 1%. This linked to the investment bank in securities of our government as the initiator in this area but cannot be denied to the investment of foreign governments. With the decrease of credit interest rate will be the development of sustainable economic growth and boost investment.

scholarly journals ANALISIS INTEREST RATE PASS-THROUGH PADA MEKANISME TRANSMISI KEBIJAKAN MONETER INDONESIA

2017 ◽  
Vol 1 (1) ◽  
pp. 125
Author(s):  
Risna Amalia Hamzah ◽  
Handri Handri
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Money Market ◽  
Bank Loans ◽  
Short Term ◽  
Consumer Loans ◽  
Pass Through ◽  
The Interest Rate

This reseach aimed to evaluate the performance of monetary policy, toexamine and test the magnitude of the response rates on deposits and bank loans to the money market interest rate, and how fast adjustment of the interest rate of deposits and loans in response to changes in money market interest rates. The performance evaluation of the level of adjustment of interest rate pass-through is done by testing the coefficient of adjustment of the interest rate deposits and loans in response to changes in money market interest rates. The object of this reseach is reported in interest rates interbank money market (rPUAB) and bank interest rates (loans and deposits) of all commercial banks in Indonesia, the data used in the form of a row of monthly time (monthly time series) of the annual report of Bank Indonesia and SEKI ( Economic and Financial statistics Indonesia), in the period 2005-2016. The method used in this research is the Autoregressive Distributed Lag (ARDL) for calculating the amount of long-term coefficients and Error Correction Model (ECM) -ARDL for calculating the amount of short-term coefficients. We find of the analysis indicate a change of monetary policy in the short term through the interest rate channel with its operational targets interest rates interbank money market (interbank) did not respond in full by the rates on deposits and loans in commercial banks in Indonesia, represented by the value of the degree of pass- through which less than 1 and there is a tendency that the longterm interest rates on loans and deposits experienced incomplete pass-through, then interest rates on consumer loans and deposits of 24 months has the speed of the slowest, which means consumer loans and deposits of 24 months in Indonesia unresponsive to changes in interbank rates. keywords: ARDL, ECM, Interest Rate pass-through, PUAB.

scholarly journals Passing on negative interest rates

2020 ◽  
Vol 56 (4) ◽  
pp. 283-290
Author(s):  
Georg Stadtmann ◽  
Karl-Heinz Moritz ◽  
Kristin Berthold ◽  
Tobias Stadtmann
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Commercial Banking ◽  
Quantitative Easing ◽  
Negative Interest Rates ◽  
Banking Market ◽  
Excess Liquidity ◽  
Demand Deposits ◽  
The Interest Rate

AbstractSince the ECB has lowered the interest rate on deposits into negative territory, more and more commercial banks are also passing on this negative interest rate to their customers. The main aim of this paper is to answer the question under which conditions the commercial banking sector will be more or less reluctant to pass the negative deposit rate on to its private customers. We first clarify the circumstances under which demand deposits and excess liquidity arise, and what role quantitative easing plays in this context. Within a game-theoretical framework, it is derived that the pressure to pass on the negative interest rate is particularly high if there are no switching costs, and the banking market follows a Bertrand competition.

scholarly journals ALUR TRANSMISI DAN EFEKTIFITAS KEBIJAKAN MONETER GANDA DI INDONESIA

2012 ◽  
Vol 14 (3) ◽  
pp. 283-315
Author(s):  
Ascarya Ascarya
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Negative Impact ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
Monetary System ◽  
Data Form ◽  
Pass Through ◽  
The Interest Rate

This study aims to investigate transmission mechanism of dual monetary system from conventional and Islamic policy rates to inflation and output using Granger and VAR methods on monthly Indonesian banking data form January 2003 to December 2009. The result shows that conventional transmission mechanismsfrom conventional policy rate are all linked tooutput and inflation, while Islamic policy rate are not linked to output and inflation.In addition, the interest rate, credit and conventional interbank rate shocks give negative and permanent impacts to inflation and output, while PLS, financing and Islamic interbank PLS, as well as SBIS(Central Bank Shariah Certificate) as Islamic policy rate shocks give positive and permanent impacts to inflation and output. SBI (Central Bank Certificate) as conventional policy givespositive impact to inflation and negative impact to output.Keywords: Monetary transmission mechanism, Interest rate pass through, Conventional Banking, Islamic BankingJEL Classification: E43, E52, G21, G28

Sign in / Sign up

Export Citation Format

Share Document