Impact of central bank policy on bank lending rate: developing nations evidence
The pass-through of the policy rate to the bank lending rate gauges the effectiveness of monetary policy in stabilizing the economy. This paper investigates how effectively the policy rates pass through to the bank lending rates, and whether the policy rate pass-through is symmetric or asymmetric in...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Faculty of Economics and Management, Universiti Putra Malaysia
2018
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| Online Access: | http://psasir.upm.edu.my/id/eprint/22655/1/29%29%20Impact%20of%20Central%20Bank%20Policy.pdf http://psasir.upm.edu.my/id/eprint/22655/ http://www.ijem.upm.edu.my/vol12_noS2/29)%20Impact%20of%20Central%20Bank%20Policy.pdf |
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| Institution: | Universiti Putra Malaysia |
| Language: | English |
| Summary: | The pass-through of the policy rate to the bank lending rate gauges the effectiveness of monetary policy in stabilizing the economy. This paper investigates how effectively the policy rates pass through to the bank lending rates, and whether the policy rate pass-through is symmetric or asymmetric in two developing nations. The paper applies the momentum threshold auto-regressive and asymmetric error correction models. The results of the latter indicate that the Malaysian and South African commercial banks adjust their lending rates downward but the lending rates seem rigid upward supporting the customer reaction theory. The paper suggests that the speed of monetary transmission is unequal across the banking sectors and that a contractionary monetary policy takes a longer time to impact the economy than an expansionary monetary policy. |
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