Modelling Australia's Retail Mortgage Rate
AbstractThere is an ongoing controversy over whether banks’ mortgage rates rise more readily than they fall due to their asymmetric responses to changes in the cash rate. This paper examines the dynamic interplay between the cash rate and the variable mortgage rate using monthly data in the post-1989 era. Unlike previous studies for Australia, our proposed threshold and asymmetric error-correction models account for both the amount and adjustment asymmetries. We found thatrate rises have much larger and more instantaneous impact on the mortgage rate than rate cuts, suggesting an urgent need for monitoring the banks’ lending behaviour in Australia.
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Bibliographic InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp12-01.
Length: 29 pages
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
More information through EDIRC
Banks’ mortgage rates; Asymmetric and threshold error-correction models; Australia;
Find related papers by JEL classification:
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-BAN-2012-09-03 (Banking)
- NEP-URE-2012-09-03 (Urban & Real Estate Economics)
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