scholarly journals Interest Rate Pass-Through in Three EU Candidate Countries: The Case of Albania, North Macedonia and Serbia

2019 ◽  
Vol 5 (2) ◽  
pp. 37
Author(s):  
Igor Velickovski ◽  
Daniela Mamuchevska
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Money Market ◽  
Transmission Channel ◽  
Speed Of Adjustment ◽  
Rate Transmission ◽  
Lending Rate ◽  
Eu Candidate Countries ◽  
Pass Through

The objective of the paper is to assess the interest rate pass-through in three EU candidate countries that is Albania, North Macedonia and Serbia. We rely on an error-correction model using monthly data over the period 2005-2019. Results suggest a complete interest rate pass-through in Albania, albeit it has been weakened during the economic and financial crisis. The relatively fast speed of adjustment indicates an effective interest rate transmission channel. In the Macedonian case, the changes of the monetary policy rate are transmitted completely to the bank lending rate, but not to the bank borrowing rate. The transmission via the money market rate has improved after the global economic and financial turmoil. In the case of Serbia, the results also suggest complete interest rate pass-through indicating that the monetary policy rate changes are transmitted into retail rates offered by the banks to savers and borrowers in the long run. Nevertheless, the speed of adjustment is relatively slow. In general, the estimated speed and extent of the response of money market interest rate and bank retail interest rates to changes in the monetary policy rate gives an indication of effective interest rate transmission channel in the case of Albania and Serbia. On the other hand, it is moderately effective in the case of North Macedonia given that the central bank rate changes affect mainly bank lending rate but not borrowing rate.

scholarly journals Perspectives on Monetary Policy and Cost of Capital: Evidence from Turkey

2017 ◽  
Vol 6 (2) ◽  
pp. 45-64
Author(s):  
Neslihan Turguttopbas
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Weighted Average ◽  
Capital Inflows ◽  
Market Rate ◽  
Rate Transmission ◽  
Lending Rate ◽  
Credit View ◽  
The Interest Rate

Abstract The target of monetary policy is generally set as to create an environment of manageable employment and affordable long-term interest rates. However, priorities of central banks may differ depending on economic and financial circumstances of individual countries. Modern approaches to monetary policy transmission can be grouped under two headings, Money View and Credit View. The money view concentrates on interest rates to explain the effects of monetary policy on aggregate spending by creating an interest rate channel. The credit channel transmission approach focuses on the supply of credits by banks following a monetary policy shift in interest rates. In 2010, the Central Bank of Turkey (CBT) developed an interest rate corridor shaped by one-week and overnight repo lending to the financial banks to absorb excessive volatility caused by short-term capital inflows. Under this framework, the CBT implements its monetary policy in two ways; firstly it can alter the interest rates of weekly repo as well as O/N lending rate. Secondly, it can configure the funding structure it provides to the financial intermediaries. In such a framework, the interest rate transmission mechanism has been operated by two benchmark interest rates, one of which is the weighted average of the cost of funds provided by the CBT and the other is the interest rate in Borsa Istanbul (BIST) money market transactions at an overnight maturity. There is a strong co-movement between the interest rates and they are affected by the movements in the CBT lending rate in both directions. Interest rates applied to deposits and loans by banks are affected by the policy rate (CBT Average Funding Rate) and the market rate (BIST O/N Repo Rate).

scholarly journals Monetary Policy in Nigeria: Investigating the Role of Private Sector Credit

2020 ◽  
Vol 03 (12) ◽  
Author(s):  
Musa U. ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Private Sector ◽  
Bank Lending ◽  
Transmission Mechanism ◽  
Call Rate ◽  
Bank Lending Channel ◽  
Treasury Bill ◽  
Lending Channel ◽  
Lending Rate

This study examines the interest rate channel of monetary policy rates through private sector credits to prices. It applies an approach that is not common in monetary policy transmission mechanism in literature as many studies on transmission mechanism of monetary policy only examine statistical relationship between policy variables and target variables which may not be able to explain the pathway through which the monetary policies are transmitted. This paper uses mediation approach to assess the significance of causal path of interest rate through the bank lending channel. This paper dwelt on the transmission paths- from maximum interest rate, inter-bank call rate, treasury bill rate to prices through the private sector credits. The findings of this study lay credence to effective and significant transmission effects of interest rates (maximum lending rate, interbank lending rate and treasury bill rate) through private sector credit to prices. The paper concludes that maximum lending rate path has the highest significant transmission effect to prices. This is followed by the treasury bill rate and the inter-bank call rate respectively. The findings in this study is new in the case of Nigeria as no previous studies have applied mediation approach to the study of transmission mechanism of bank lending channel in Nigeria. Central banks should explore ways to effectively make policy towards effectively directing the monetary policy through maximum lending rate and treasury bill rates as they have the most significant paths through which the monetary policy rate is transmitted to prices.

Monetary Policy Pass-through, Ownership and Crisis: How Robust is the Indian Evidence?

2021 ◽  
Vol 15 (4) ◽  
pp. 456-483
Author(s):  
Jugnu Ansari ◽  
Saibal Ghosh
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Loan Pricing ◽  
Lending Channel ◽  
Private Banks ◽  
Monetary Policy Shock ◽  
Pass Through ◽  
The Interest Rate ◽  
The Impact

Employing disaggregated data for 2001–2016, this study investigates the lending and loan pricing behaviour of state-owned and domestic private banks in response to monetary policy. Three major findings emerge. First, although both the interest rate and the bank lending channels are relevant for monetary pass-through, there is a trade-off: the impact of the former is much higher than the latter, although it occurs with a significant lag. Second, domestic private banks have a far greater response to a monetary policy shock under the interest rate channel, whereas state-owned banks display a greater response under the bank-lending channel. And finally, state-owned banks cut back lending during periods of crises, although no such response is manifest in domestic private banks. JEL Codes: C23, D4, E43, E52, G21, L10

scholarly journals Interest Rate Pass-Through: Empirical Study Towards Monetary Policy Transmission Effectiveness in Indonesia

2018 ◽  
Vol 2 (02) ◽  
pp. 14
Author(s):  
Heni Hasanah
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Monetary Policy Transmission ◽  
Deposit Rate ◽  
Policy Transmission ◽  
Lending Rate ◽  
Pass Through ◽  
Effectiveness Of Monetary Policy

<p><em>This research aims to measure the effectiveness of monetary policy transmission, especially through the interest rate channel. The analysis was conducted on the first stage of its transmission, namely Interest Rate Pass-through (IRPT). IRPT refers to condition in which retail interest rate (both deposit and lending rate) responds to changes in policy rate of central bank. IRPT was measured using Error Correction Model (ECM) for time series data in the period of January 2010 - December 2015. The results of this study indicated that degree of long term and short term IRPT is incomplete for deposit and lending rate. In addition, IRPT for deposit rate is higher than lending rate, but the adjustment process of lending rate faster than deposit rate. Finally, model that include other variables (macroeconomic and internal banking indicator) generate long term IRPT which is smaller than the standard model. This results implies that the Central Bank, the FSA, and government needs to pay attention to the stability of the other variables that may interfere or reduce the effectiveness of monetary policy through the interest channel.     </em></p><p><strong><em>JEL Classification: </em></strong>E42, E43, E52</p><strong><em>Keywords: </em></strong><em>Deposit rate, ECM,  IRPT, Lending Rate, Policy Rate</em>

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 Uji Empiris Mekanisme Transmisi Kebijakan Moneter: Interest Rate Pass-through Sektor Perbankan Indonesia

2016 ◽  
Vol 16 (2) ◽  
pp. 187-204
Author(s):  
Buddi Wibowo ◽  
Eduardo Lazuardi
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Error Correction ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Speed Of Adjustment ◽  
Vector Error ◽  
Pass Through

Empirical Evidence of Monetary Policy Transmission Mechanism: Indonesia Banking Sector Interest Rate Pass-throughRobust measurement of interest rates speed of adjustment to monetary policy changes is very important to obtain acomprehensive understanding on the monetary transmission process and the eectiveness of monetary policy. The speed of adjustment are determined by number of frictions that interfere with the transmission of monetary policy.We measure Indonesia interest rate pass-through which have distinct characteristics in terms of banking competition, segmented banking market and concentrated structure. Interest rate pass-through is measured by using Vector Error Correction Model (VECM) and Mean Adjusted Lags (MAL). This paper shows the interest rate adjustment did take a relatively long time.Keywords: Interest Rate Pass-through; Bank; Monetary; VECM; MALAbstrakPengukuran kecepatan penyesuaian suku bunga perbankan terhadap perubahan kebijakan moneter sangat penting sehingga diperoleh pemahaman komprehensif atas proses transmisi moneter dan efektivitas kebijakan. Kecepatan perubahan suku bunga deposito dan kredit perbankan ditentukan oleh adanya friksi-friksi transmisi kebijakan moneter ke sektor perbankan dan sektor riil. Penelitian ini mengukur interest rate pass-through perbankan Indonesia yang memiliki karakteristik khas dalam hal tingkat kompetisi perbankan, segmentasi pasar, dan struktur industri perbankan yang tinggi. Interest rate pass-through diukur dengan menggunakan Vector Error Correction Model (VECM) dan Mean Adjusted Lags (MAL). Hasil uji menunjukkan penyesuaian suku bunga membutuhkan waktu yang lama.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Nzuki Nyangu ◽  
Freshia Wangari Waweru ◽  
Nyankomo Marwa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Asymmetric Adjustment ◽  
Deposit Rate ◽  
Content Type ◽  
Long Run ◽  
Adjustment Speed ◽  
Short Run ◽  
Pass Through

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

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