{
  "title": "The Policy Interest-Rate Pass-Through in Central America",
  "publication": "IMF Working Papers, October 1, 2011",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-policy-interest-rate-pass-through-in-central-america-25299",
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  "summary": "Several Central American (CADR) central banks with independent monetary policies have adopted policy interest rates as their main instrument to signal their monetary policy stances, often in the context of adopting or transitioning to inflation targeting regimes.",
  "sections": [
    {
      "heading": "Overview and scope",
      "content": "- Authors: Alejandro Carrion-Menendez, Florencia Frantischek\n- Publication date: October 1, 2011\n- Publication series: Working Paper No. 2011/240\n- Pages: 21\n- Volume: 2011\n- Issue: 240\n- DOI: https://doi.org/10.5089/9781463923228.001\n- ISBN: 9781463923228\n- ISSN: 1018-5941"
    },
    {
      "heading": "Core findings",
      "content": "- The interest-rate transmission mechanism (pass-through of the policy rate to market rates) is generally weaker and slower in Central America (CADR) than in the LA6 (the countries selected as benchmarks).\n- Factors examined as potential drivers of the weaker and slower pass-through include:\n  - degrees of financial dollarization\n  - exchange rate flexibility\n  - bank concentration\n  - financial sector development\n  - fiscal dominance"
    },
    {
      "heading": "Empirical approach",
      "content": "- Analytical method: panel data analysis\n- Comparative focus: CADR central banks with independent monetary policies versus LA6 benchmark countries\n- Policy instrument studied: policy interest rates used to signal monetary policy stances, often in the context of adopting or transitioning to inflation targeting regimes"
    },
    {
      "heading": "Policy-relevant implications and recommendations",
      "content": "- Strengthen transmission mechanism by increasing exchange rate flexibility.\n- Over time, strengthen transmission mechanism by adopting measures to:\n  - reduce financial dollarization\n  - develop the financial sector\n  - reduce bank concentration"
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Bank credit; Banking; Central bank policy rate; Deposit rates; Exchange rate flexibility; Financial services; Foreign exchange; Inflation targeting; Monetary policy; Monetary policy frameworks\n- Keywords: bank concentration; Central America; Central bank policy rate; Deposit rates; exchange rate; Exchange rate flexibility; financial sector; Inflation targeting; interest rate; interest rate pass-through; interest rate transmission mechanism; interest-rate transmission; Latin America; lending pass-through Cummulative response; Monetary policy; Monetary policy frameworks; policy rate; rate; WP\n\nIMF Working Paper No. 2011/240, Alejandro Carrion-Menendez and Florencia Frantischek, October 1, 2011.\n\n---\n\n Content in this bundle\n\n- wp11240\n  - wp11240 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp11240 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-policy-interest-rate-pass-through-in-central-america-25299"
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    "Authors: Alejandro Carrion-Menendez, Florencia Frantischek",
    "Published: October 1, 2011",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781463923228.001",
    "Authors: Alejandro Carrion-Menendez, Florencia Frantischek",
    "Publication date: October 1, 2011",
    "Publication series: Working Paper No. 2011/240",
    "Pages: 21",
    "Volume: 2011",
    "Issue: 240",
    "DOI: https://doi.org/10.5089/9781463923228.001",
    "ISBN: 9781463923228",
    "ISSN: 1018-5941",
    "The interest-rate transmission mechanism (pass-through of the policy rate to market rates) is generally weaker and slower in Central America (CADR) than in the LA6 (the countries selected as benchmarks).",
    "Factors examined as potential drivers of the weaker and slower pass-through include:",
    "Analytical method: panel data analysis",
    "Comparative focus: CADR central banks with independent monetary policies versus LA6 benchmark countries",
    "Policy instrument studied: policy interest rates used to signal monetary policy stances, often in the context of adopting or transitioning to inflation targeting regimes",
    "Strengthen transmission mechanism by increasing exchange rate flexibility.",
    "Over time, strengthen transmission mechanism by adopting measures to:",
    "Subject: Bank credit; Banking; Central bank policy rate; Deposit rates; Exchange rate flexibility; Financial services; Foreign exchange; Inflation targeting; Monetary policy; Monetary policy frameworks",
    "Keywords: bank concentration; Central America; Central bank policy rate; Deposit rates; exchange rate; Exchange rate flexibility; financial sector; Inflation targeting; interest rate; interest rate pass-through; interest rate transmission mechanism; interest-rate transmission; Latin America; lending pass-through Cummulative response; Monetary policy; Monetary policy frameworks; policy rate; rate; WP",
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