Many authors have studied the flexibility of bank interest rates in different countries. In this paper we show some evidence for the Chilean banking industry, concluding that there is some sluggishness in the adjustment of banks’ lending rates to changes in the policy rate. However, Chile is among the countries with the most flexible interest rates. On the basis of individual bank data and a theoretical model, we identified some bank characteristics that might affect the degree of stickiness. Stylized facts and estimation results suggest that larger banks with a smaller portion of past-due loans and a higher percentage of household loans adjust faster to policy rate movements.
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Article provided by Central Bank of Chile in its journal Economía Chilena.
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