The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment

The interest rate channel is the primary and most important mechanism for policymakers. Knowledge of the pass-through of interest rates has allowed policymakers to draw conclusions on how fast and to what extent a shock in policy rates are transmitted to retail rates. This paper investigates the...

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Main Authors: Tang, Maggie May-Jean, Puah, Chin Hong, Liew, Venus Khim-Sen
Format: E-Article
Language:English
Published: Universiti Putra Malaysia 2015
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Online Access:http://ir.unimas.my/id/eprint/18008/1/The%20Interest%20Rate%20Pass-Through%20in%20Malaysia%20%28abstract%29.pdf
http://ir.unimas.my/id/eprint/18008/
http://www.econ.upm.edu.my/ijem
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Institution: Universiti Malaysia Sarawak
Language: English
id my.unimas.ir.18008
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spelling my.unimas.ir.180082017-10-06T06:50:24Z http://ir.unimas.my/id/eprint/18008/ The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment Tang, Maggie May-Jean Puah, Chin Hong Liew, Venus Khim-Sen H Social Sciences (General) The interest rate channel is the primary and most important mechanism for policymakers. Knowledge of the pass-through of interest rates has allowed policymakers to draw conclusions on how fast and to what extent a shock in policy rates are transmitted to retail rates. This paper investigates the pass-through effect of policy rate on retail rates in Malaysia. Asymmetric threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) proposed by Enders and Siklos (2001) are employed in the study. Over the period of January 1987 to December 2014, the policy rate was found to be an incomplete pass-through to deposit and lending rates. Based on the asymmetric analysis, we discover the asymmetry effects in the response of retail rates to the change of policy rate. In addition, we find downward rigidity in both deposit and lending rates. Universiti Putra Malaysia 2015 E-Article PeerReviewed text en http://ir.unimas.my/id/eprint/18008/1/The%20Interest%20Rate%20Pass-Through%20in%20Malaysia%20%28abstract%29.pdf Tang, Maggie May-Jean and Puah, Chin Hong and Liew, Venus Khim-Sen (2015) The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment. International Journal of Economics and Management, 9 (2). pp. 370-381. ISSN 1823 - 836X http://www.econ.upm.edu.my/ijem
institution Universiti Malaysia Sarawak
building Centre for Academic Information Services (CAIS)
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Sarawak
content_source UNIMAS Institutional Repository
url_provider http://ir.unimas.my/
language English
topic H Social Sciences (General)
spellingShingle H Social Sciences (General)
Tang, Maggie May-Jean
Puah, Chin Hong
Liew, Venus Khim-Sen
The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
description The interest rate channel is the primary and most important mechanism for policymakers. Knowledge of the pass-through of interest rates has allowed policymakers to draw conclusions on how fast and to what extent a shock in policy rates are transmitted to retail rates. This paper investigates the pass-through effect of policy rate on retail rates in Malaysia. Asymmetric threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) proposed by Enders and Siklos (2001) are employed in the study. Over the period of January 1987 to December 2014, the policy rate was found to be an incomplete pass-through to deposit and lending rates. Based on the asymmetric analysis, we discover the asymmetry effects in the response of retail rates to the change of policy rate. In addition, we find downward rigidity in both deposit and lending rates.
format E-Article
author Tang, Maggie May-Jean
Puah, Chin Hong
Liew, Venus Khim-Sen
author_facet Tang, Maggie May-Jean
Puah, Chin Hong
Liew, Venus Khim-Sen
author_sort Tang, Maggie May-Jean
title The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
title_short The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
title_full The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
title_fullStr The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
title_full_unstemmed The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
title_sort interest rate pass-through in malaysia: an analysis on asymmetric adjustment
publisher Universiti Putra Malaysia
publishDate 2015
url http://ir.unimas.my/id/eprint/18008/1/The%20Interest%20Rate%20Pass-Through%20in%20Malaysia%20%28abstract%29.pdf
http://ir.unimas.my/id/eprint/18008/
http://www.econ.upm.edu.my/ijem
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