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Interest Rate Pass-Through In Colombia: A Micro-Banking Perspective

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  • Rocio Betancourt

    ()

  • Hernando Vargas

    ()

  • Norberto Rodríguez

    ()

Abstract

Banks and other credit institutions are key players in the transmission of monetary policy, especially in emerging market economies, where the responses of deposit and loan interest rates to shifts in policy rates are among the most important channels. This pass-through depends on the conditions prevailing in the loan and deposit markets, which are, in turn, affected by macroeconomic factors. Hence, when setting their policy, monetary authorities must take into account those conditions and the behavior of banks. This paper illustrates this point by means of a theoretical micro-banking model and shows empirical evidence for Colombia suggesting that some aspects of the model might be relevant features of the transmission mechanism.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 407.

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Handle: RePEc:bdr:borrec:407

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Keywords: Monetary Transmission Mechanisms; Interest Rate Pass-Through; Banking Classification JEL: G21; E43; E44; E52.;

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  1. Carlo Cottarelli & Angeliki Kourelis, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 587-623, December.
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Citations

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Cited by:
  1. Óscar Reinaldo Becerra & Luis Fernando Melo Velandia., 2009. "Transmisión de Tasas de Interés bajo el Esquema de Metas de Inflación: Evidencia para Colombia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 107-134.
  2. Ludek Niedermayer, 2008. "Notes on the monetary transmission mechanism in the Czech economy," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 213-219 Bank for International Settlements.
  3. Luis Eduardo Arango & Andrés González & Jhon Jairo León & Luis Fernando Melo, 2006. "Efectos de los cambios en la tasa de intervención del Banco de la República sobre la estructura a plazo," BORRADORES DE ECONOMIA 002425, BANCO DE LA REPÚBLICA.
  4. Roseline N. Misati & Esman M. Nyamongo & Anne W. Kamau, 2011. "Interest rate pass-through in Kenya," International Journal of Development Issues, Emerald Group Publishing, vol. 10(2), pages 170-182, July.
  5. Hernando Vargas, 2008. "The transmission mechanism of monetary policy in Colombia: major changes and current features," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 183-211 Bank for International Settlements.
  6. Serge Jeanneau & Camilo E Tovar, 2008. "Domestic securities markets and monetary policy in Latin America: overview and implications," BIS Papers chapters, in: Bank for International Settlements (ed.), New financing trends in Latin America: a bumpy road towards stability, volume 36, pages 140-163 Bank for International Settlements.
  7. Hernando Vargas & Carlos Varela, 2008. "Capital flows and financial assets in Colombia: recent behaviour, consequences and challenges for the central bank," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 153-184 Bank for International Settlements.
  8. Hernando Vargas, . "The Transmission Mechanism of Monetary Policy in Colombia Major Changes and Current Features," Borradores de Economia 431, Banco de la Republica de Colombia.
  9. Hernando Vargas H., 2007. "The Transmission Mechanism of Monetary Policy in Colombia Major Changes and Current Features," BORRADORES DE ECONOMIA 003630, BANCO DE LA REPÚBLICA.
  10. International Monetary Fund, 2008. "Is Monetary Policy Effective When Credit is Low?," IMF Working Papers 08/288, International Monetary Fund.
  11. Bank for International Settlements & Federal Reserve Bank of Atlanta, 2008. "New financing trends in Latin America: a bumpy road towards stability," BIS Papers, Bank for International Settlements, number 36, May.

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