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Determinants of commercial bank retail interest rate adjustments: Evidence from a panel data model

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  • Perera, Anil
  • Wickramanayake, J.

Abstract

This paper examines the determinants of commercial bank retail interest rate pass-through. While providing empirical evidence for interest rate pass-through across countries, based on a panel data model for 122 countries, we observe that retail interest rate adjustment is related to a number of macroeconomic, financial/banking as well as institutional/governance factors. Amongst these, the level of financial market development, banking sector market power and central bank transparency remain key factors. These results are robust for different sub-samples of countries accounting for cross-country heterogeneity and provide important policy implications for central banks in the conduct of monetary policy.

Suggested Citation

  • Perera, Anil & Wickramanayake, J., 2016. "Determinants of commercial bank retail interest rate adjustments: Evidence from a panel data model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 1-20.
    • Handle: RePEc:eee:intfin:v:45:y:2016:i:c:p:1-20
    DOI: 10.1016/j.intfin.2016.05.006
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    More about this item

    Keywords

    Retail interest rates; Monetary policy transmission; Panel data; GMM estimates;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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