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Deposit Rate and Lending Rate in Jordan, Which leads Which? A Cointegration Analysis

Author

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  • Osama D. Sweidan

    (Department of Accounting, Finance and Economics, University of Sharjah, UAE)

Abstract

This study intends to investigate empirically the long-run relationship between deposit and lending rates in Jordan by utilizing quarterly data over the period (1994-2010). Empirically, we search to identify the dominant interest rate; either deposit rate or lending rate. To achieve the current study goals, we employ the error correction model technique and the asymmetric short-run dynamic model. The empirical evidence of the Jordanian economy illustrates deposit and lending rates have a long-run relationship. Deposit rate leads lending rate. As a result, the short-run lending rate adjustment for the deviation from the long-run equilibrium by about 22 percent in the current period. In the long-run, lending rate adjusts by 90 percent for a change in deposit rate.

Suggested Citation

  • Osama D. Sweidan, 2012. "Deposit Rate and Lending Rate in Jordan, Which leads Which? A Cointegration Analysis," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 15(1), pages 37-48, May.
    • Handle: RePEc:zag:zirebs:v:15:y:2012:i:2:p:37-48
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    More about this item

    Keywords

    Monetary policy; Retail interest rate; Symmetric adjustment; Interest rate pass-through; Error correction model.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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