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

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Listed author(s):
  • 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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Date of creation: Oct 2006
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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Find related papers by JEL classification:
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
  • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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  17. Juan Manuel Julio, 2001. "Relación entre la Tasa de Intervención del Banco de la República y las Tasas del Mercado: Una Exploración Empírica," Borradores de Economia 188, Banco de la Republica de Colombia.
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Cited by:

  1. 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.
  2. 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.
  3. 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.
  4. Avci, S. Burcu & Yucel, Eray, 2016. "Effectiveness of Monetary Policy: Evidence from Turkey," MPRA Paper 70848, University Library of Munich, Germany.
  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. 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, March.
  7. Fernando Tenjo Galarza & Enrique López Enciso & Héctor Zárate Solano, 2015. "Riesgo de crédito y la transmisión de la política monetaria en Colombia," BORRADORES DE ECONOMIA 012616, BANCO DE LA REPÚBLICA.
  8. 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.
  9. 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.
  10. Luis Eduardo Arango & Andrés González & John Jairo León & Luis Fernando Melo., 2008. "Cambios de la Tasa de Política y su Efecto en la Estructura a Plazo de Colombia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 45(132), pages 257-291.
  11. Javier Gutiérrez Rueda & Andrés Murcia Pabón, 2015. "El papel de la estructura del sistema financiero en la transmisión de la política monetaria," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 33(76), pages 44-52.
  12. Roseline N. Misati, 2011. "Interest rate pass-through in Kenya," International Journal of Development Issues, Emerald Group Publishing, vol. 10(2), pages 170-182, July.
  13. International Monetary Fund, 2008. "Is Monetary Policy Effective When Credit is Low?," IMF Working Papers 08/288, International Monetary Fund.

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