The Lending-Deposit Rate Relationship in Eastern European Countries: Evidence from the Rank Test for Non-linear Cointegration
AbstractThis study carries out an examination of the potential non-linear cointegration between the lending and deposit rates of eight Eastern European countries using the non-parametric rank tests proposed by Breitung (2001). Based upon our adoption in this study of the threshold error-correction model (TECM), we find solid evidence of an asymmetric price transmission effect, in both the short term and the long term, between lending and deposit rates. Thus, our results reveal that there are indeed such long-run non-linear cointegration relationships between the lending and deposit rates in these Eastern European countries. Furthermore, we go on to successfully capture the dynamic adjustment of the spread.
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Bibliographic InfoArticle provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.
Volume (Year): 60 (2010)
Issue (Month): 6 (December)
lending-deposit rates; rank test; non-linearity;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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