IDEAS home Printed from https://ideas.repec.org/a/pid/journl/v60y2021i1p17-26.html
   My bibliography  Save this article

Testing the Threshold Asymmetric Co-integration Interest Rate Pass-Through in the Presence of Stylised Properties: Evidence from Pakistan

Author

Listed:
  • Farrukh Mahmood

    (Department of Econometrics, Pakistan Institute of Development Economics (PIDE),)

  • Muhammad Zakaria

    (Associate Professor, Department of Economics, COMSATS University, Islamabad)

Abstract

The study examines the existence of interest rate pass-through between retail interest rates and policy rates in Pakistan using monthly data from January 2004 to March 2017. Both retail interest rates and policy rates follow stylised properties of financial time series. Therefore, the EC-E-GARCH-M model is used to estimate the interest rate pass-through between retail and policy rates as suggested by Wang and Lee (2009). Empirically, there is an incomplete pass-through from policy rates to retail interest rates, which is 73 percent basic points. This rate of pass-through is higher compared to previous studies for Pakistan. The results also highlight that there is an upward rigidity in the deposit rate model.

Suggested Citation

  • Farrukh Mahmood & Muhammad Zakaria, 2021. "Testing the Threshold Asymmetric Co-integration Interest Rate Pass-Through in the Presence of Stylised Properties: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 60(1), pages 17-26.
    • Handle: RePEc:pid:journl:v:60:y:2021:i:1:p:17-26
    as

    Download full text from publisher

    File URL: http://www.pide.org.pk/pdf/PDR/2020/Volume1/17-26.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    EC-E-GARCH-M Model; Interest Rate Pass-Through; Stylised Properties; Threshold Asymmetric Cointegration; Rigidities;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:60:y:2021:i:1:p:17-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Khurram Iqbal (email available below). General contact details of provider: https://edirc.repec.org/data/pideipk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.