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Retail Bank Interest Rate Pass-Through: Is Chile Atypical?

Author/Editor: Espinosa-Vega, Marco | Rebucci, Alessandro
Authorized for Distribution: May 1, 2003
Electronic Access: Free Full Text (PDF file size is 1,167KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper investigates empirically the pass-through of money market interest rates to retail banking interest rates in Chile, the United States, Canada, Australia, New Zealand, and five European countries. Overall, Chile's pass-through does not appear atypical. Based on a standard error-correction model, we find that, as in most countries considered, Chile's measured pass-through is incomplete. But Chile's pass-through is also faster than in many other countries considered and is comparable to that in the United States. While we find no significant evidence of asymmetry in Chile's pass-through across states of the interest rate or monetary policy cycle, we do find some evidence of parameter instability, around the time of the Asian and Russian crises. However, we do not find evidence that the switch to a more flexible exchange rate regime in 1999 and the "nominalization" of Chile's interest rate targets in 2001 have affected significantly the pass-through process.
 
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Series: Working Paper No. 03/112
Subject(s): Commercial banks | Chile | Interest rates | Central banks
Author's keyword(s): Words
 
English  
    Published:   May 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1122003   Pages:   35
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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