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

IMF Working Papers, May 1, 2003

Source details

The 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 conclusion: Chile's pass-through does not appear atypical.
Measured pass-through in Chile is incomplete, as in most countries considered.
Chile's pass-through is faster than in many other countries considered and is comparable to that in the United States.
No significant evidence of asymmetry in Chile's pass-through across states of the interest rate or monetary policy cycle.
Some evidence of parameter instability around the time of the Asian and Russian crises.
No 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.

Empirical approach: standard error-correction model used to measure interest rate pass-through across countries.

Subjects: 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

International Monetary Fund. Retail Bank Interest Rate Pass-Through: Is Chile Atypical? IMF Working Papers 2003, 112 (2003).

Retail Bank Interest Rate Pass-Through: Is Chile Atypical? - WP/03/112
- Retail Bank Interest Rate Pass-Through: Is Chile Atypical? - WP/03/112 (Markdown version)
- Retail Bank Interest Rate Pass-Through: Is Chile Atypical? - WP/03/112 (PDF)