Retail Bank Interest Rate Pass-through: Is Chile Atypical?
In: Banking Market Structure and Monetary Policy
AbstractThis paper investigates empirically the pass-through of money market interest rates to retail banking interest rates in Chile, the United States, Canada, Australia, New Zealand, and five European countries. Overall, Chileâs pass-through does not appear atypical. Based on a standard errorcorrection model, we find that, as in most countries considered, Chileâs measured pass-through is incomplete. But Chileâs pass-through is also faster than in many other countries considered and is comparable to that in the United States. While we find no significant evidence of asymmetry in Chileâs pass-through across states of the interest rate or monetary policy cycle, we do find some evidence of parameter instability, around the time of the Asian and Russian crises. However, we do not find evidence that the switch to a more flexible exchange rate regime in 1999 and the ânominalizationâ of Chileâs interest rate targets in 2001 have affected significantly the pass-through process.
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This chapter was published in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Banking Market Structure and Monetary Policy, , chapter 5, pages 147-182, 2004.
This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v07c05pp147-182.
Other versions of this item:
- Marco A. Espinosa-Vega & Alessandro Rebucci, 2003. "Retail Bank Interest Rate Pass-Through: Is Chile Atypical?," Working Papers Central Bank of Chile 221, Central Bank of Chile.
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