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

By Alessandro Rebucci, Marco A Espinosa-Vega

May 1, 2003

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Alessandro Rebucci, and Marco A Espinosa-Vega. Retail Bank Interest Rate Pass-Through: Is Chile Atypical?, (USA: International Monetary Fund, 2003) accessed September 20, 2024

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.

Subject: Banking, Central bank policy rate, Deposit rates, Financial markets, Financial services, Interbank rates, Market interest rates, Money markets

Keywords: Bank interest, Banking rate, Central Bank, Central bank policy rate, Deposit rates, Europe, Interbank rates, Interest rate, Interest rate pass-through, Interest Rates, Lending rate, Loan rate stickiness, Market interest rates, Mean lag, Money market rate, Money markets, Pass-Through, Pass-through asymmetry, Pass-through incompleteness, Pass-through mechanism, Rate, Rate stickiness, Treasury bill, UF rate, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/112
Stock No:

WPIEA1122003
ISBN:

9781451853629
ISSN:

1018-5941

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