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On the dynamics of lending and deposit interest rates in emerging markets:a non-linear approach

Listed author(s):
  • Ana María Iregui

    ()

  • Costas Milas

    ()

  • Jesus Otero

    ()

This paper studies the dynamics of lending and deposit rates in two emerging markets in Latin America: Colombia and Mexico. The dynamics of lending (deposit) interest rates are driven by the exogenous interbank interest rate and deviations from the long-run lending-interbank (deposit-interbank) interest rate relationship. Allowing for different interest rate behavior during periods characterized by large and small values of the spread, the non-linear specification proves superior to the linear one.

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File URL: http://www.brunel.ac.uk/329/efwps/02-29.pdf
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Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 02-29.

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Length: 21 pages
Date of creation: Nov 2002
Handle: RePEc:bru:bruppp:02-29
Contact details of provider: Postal:
Brunel University, Uxbridge, Middlesex UB8 3PH, UK

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  1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  2. Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
  3. Scholnick, Barry, 1996. "Asymmetric adjustment of commercial bank interest rates: evidence from Malaysia and Singapore," Journal of International Money and Finance, Elsevier, vol. 15(3), pages 485-496, June.
  4. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937.
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  6. Jansen, Eilev S. & Teräsvirta, Timo, 1995. "Testing Parameter Constancy and super Exogeneity in Econometric Equations," SSE/EFI Working Paper Series in Economics and Finance 53, Stockholm School of Economics.
  7. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 119-136, Suppl. De.
  8. Lim, G C, 2001. "Bank Interest Rate Adjustments: Are They Asymmetric?," The Economic Record, The Economic Society of Australia, vol. 77(237), pages 135-147, June.
  9. Dornbusch, Rudiger & Fischer, Stanley, 1993. "Moderate Inflation," World Bank Economic Review, World Bank Group, vol. 7(1), pages 1-44, January.
  10. Concetta Chiuri, Maria & Ferri, Giovanni & Majnoni, Giovanni, 2002. "The macroeconomic impact of bank capital requirements in emerging economies: Past evidence to assess the future," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 881-904, May.
  11. Adolfo Barajas & Roberto Steiner & Natalia Salazar, 1999. "Interest Spreads in Banking in Colombia, 1974-96," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1-4.
  12. repec:idb:wpaper:320 is not listed on IDEAS
  13. Barajas, Adolfo & Steiner, Roberto & Salazar, Natalia, 2000. "The impact of liberalization and foreign investment in Colombia's financial sector," Journal of Development Economics, Elsevier, vol. 63(1), pages 157-196, October.
  14. Armando Montenegro, 1983. "La crisis del sector financiero colombiano," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 2(4), pages 51-89, Diciembre.
  15. Liliana Rojas-Suárez & Steven R. Weisbrod, 1996. "Building Stability in Latin American Financial Markets," IDB Publications (Working Papers) 5921, Inter-American Development Bank.
  16. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-945, September.
  17. Barry Scholnick, 1996. "Retail Interest Rate Rigidity after Financial Liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 433-437, April.
  18. Frost, Denise & Bowden, Roger, 1999. "An Asymmetry Generator for Error-Correction Mechanisms, with Application to Bank Mortgage-Rate Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 253-263, April.
  19. Anderson, Heather M, 1997. "Transaction Costs and Non-linear Adjustment towards Equilibrium in the US Treasury Bill Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 465-484, November.
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