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Interest Rate Pass-Through In the Common Monetary Area of the SACU Countries

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  • Sander, Harald
  • Kleimeier, Stefanie

    (METEOR)

Abstract

We investigate the interest rate pass-through in the four Common Monetary Area (CMA) countries of the South African Customs Union (SACU). We employ an empirical pass-through model that allows for thresholds, asymmetric adjustment, and structural changes. We show that CMA bank lending markets exhibit quite some degree of homogenization as the pass-through is often fast and complete. Deposit markets are somewhat more heterogeneous by showing differing degrees of interest rate stickiness and asymmetric adjustment. Policy makers should therefore be concerned about imperfect competition which may be at the heart of the remaining cross-country differences in monetary transmission in the CMA.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 023.

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Date of creation: 2006
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Handle: RePEc:unm:umamet:2006023

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Keywords: monetary economics ;

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  1. Giovanni Ferri & Carlo Cottarelli & Andrea Generale, 1995. "Bank Lending Rates and Financial Structure in Italy," IMF Working Papers 95/38, International Monetary Fund.
  2. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
  3. Carlo Cottarelli & Giovanni Ferri & Andrea Generale, 1995. "Bank Lending Rates and Financial Structure in Italy: A Case Study," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 670-700, September.
  4. Mojon, BenoƮt, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  5. Claudio E. V. Borio & Wilhelm Fritz, 1995. "The response of short-term bank lending rates to policy rates: a cross-country perspective," BIS Working Papers 27, Bank for International Settlements.
  6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  7. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  8. Diebold, Francis X. & Chen, Celia, 1996. "Testing structural stability with endogenous breakpoint A size comparison of analytic and bootstrap procedures," Journal of Econometrics, Elsevier, vol. 70(1), pages 221-241, January.
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Cited by:
  1. Karagiannis, Stelios & Panagopoulos, Yannis & Vlamis, Prodromos, 2010. "Interest rate pass-through in Europe and the US: Monetary policy after the financial crisis," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 323-338, May.
  2. Anna Sznajderska, 2012. "On the empirical evidence of asymmetry effects in the interest rate pass-through in Poland," National Bank of Poland Working Papers 114, National Bank of Poland, Economic Institute.
  3. Haughton, Andre Yone & Iglesias, Emma M., 2012. "Interest rate volatility, asymmetric interest rate pass through and the monetary transmission mechanism in the Caribbean compared to US and Asia," Economic Modelling, Elsevier, vol. 29(6), pages 2071-2089.
  4. Nikoloz Gigineishvili, 2011. "Determinants of Interest Rate Pass-Through," IMF Working Papers 11/176, International Monetary Fund.
  5. Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana," IMF Working Papers 11/275, International Monetary Fund.
  6. Paraschiv, Florentina, 2012. "Adjustment Policy of Deposit Rates in the Case of Swiss non-Maturing Savings Accounts," Working Papers on Finance 1219, University of St. Gallen, School of Finance.

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