Retail Bank Interest Rate Pass-Through: Is Chile Atypical?
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, Chile’s pass-through does not appear atypical. Based on a standard errorcorrection model, we find that, as in most countries considered, Chile’s measured pass-through is incomplete. But Chile’s 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 Chile’s 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 “nominalization” of Chile’s interest rate targets in 2001 have affected significantly the pass-through process.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 221.
Date of creation: Aug 2003
Date of revision:
Other versions of this item:
- Marco A. Espinosa-Vega & Alessandro Rebucci, 2004. "Retail Bank Interest Rate Pass-through: Is Chile Atypical?," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 5, pages 147-182 Central Bank of Chile.
- NEP-ALL-2003-08-31 (All new papers)
- NEP-IFN-2003-08-31 (International Finance)
- NEP-LAM-2003-08-31 (Central & South America)
- NEP-MAC-2003-08-31 (Macroeconomics)
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