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Pass-through of Large Changes in Monetary Policy Rate – Evidence for Chile

  • J. Sebastián Becerra
  • Luis Ceballos
  • Felipe Córdova
  • Michael Pedersen

We examine consumption and commercial lending rates evolution, identifying the main determinants of their movements. Our objective is to distinguish effects related to monetary policy rate from those due to higher risk; this is done through counterfactual simulations around relevant variables. Results indicate that monetary policy rate cuts have compensated the lending rate increase caused by higher uncertainty, both domestic and external.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 522.

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Date of creation: Aug 2009
Date of revision:
Handle: RePEc:chb:bcchwp:522
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  1. Alessandro Rebucci & Marco A Espinosa-Vega, 2003. "Retail Bank Interest Rate Pass-Through: Is Chile Atypical?," IMF Working Papers 03/112, International Monetary Fund.
  2. Harvey, Andrew & Koopman, Siem Jan & Riani, Marco, 1997. "The Modeling and Seasonal Adjustment of Weekly Observations," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 354-68, July.
  3. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
  4. Solange Berstein & J. Rodrigo Fuentes, 2004. "Is There Lendign Rate Stickiness in the Chilean Banking Industry?," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 6, pages 183-210 Central Bank of Chile.
  5. M. van leuvensteijn & C. Kok Sorensen & J.A. Bikker & A.A.R.J.M. van Rixtel, 2008. "Impact of bank competition on the interest rate pass-through in the euro area," DNB Working Papers 171, Netherlands Central Bank, Research Department.
  6. de Bondt, Gabe & Mojon, Benoît & Valla, Natacha, 2005. "Term structure and the sluggishness of retail bank interest rates in euro area countries," Working Paper Series 0518, European Central Bank.
  7. Marotta, Giuseppe, 2009. "Structural breaks in the lending interest rate pass-through and the euro," Economic Modelling, Elsevier, vol. 26(1), pages 191-205, January.
  8. Linda A. Toolsema & Jan-Egbert Sturm & Jakob de Haan, 2001. "Convergence of Monetary Transmission in EMU New Evidence," CESifo Working Paper Series 465, CESifo Group Munich.
  9. Reint Gropp & Christoffer Kok & Jung-Duk Lichtenberger, 2014. "The Dynamics of Bank Spreads and Financial Structure," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 1450014-1-1.
  10. Wu, Yangru & Zhang, Hua, 1997. " Do Interest Rates Follow Unit-Root Processes? Evidence from Cross-Maturity Treasury Bill Yields," Review of Quantitative Finance and Accounting, Springer, vol. 8(1), pages 69-81, January.
  11. Pierce, David A & Grupe, Michael R & Cleveland, William P, 1984. "Seasonal Adjustment of the Weekly Monetary Aggregates: A Model-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(3), pages 260-70, July.
  12. Claudia Sotz P. & Felipe Alarcón G., 2007. "Mercado Swap de Tasas de Interés y Expectativas de TPM e Inflación," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 10(2), pages 97-102, August.
  13. Teruyoshi Kobayashi, 2008. "Incomplete Interest Rate Pass-Through and Optimal Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 77-118, September.
  14. Boris Hofmann, 2006. "EMU and the transmission of monetary policy: evidence from business lending rates," Empirica, Springer, vol. 33(4), pages 209-229, September.
  15. Heinemann, Friedrich & Schüler, Martin, 2002. "Integration benefits on EU retail credit markets: evidence from interest rate pass-through," ZEW Discussion Papers 02-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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