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Retail Bank Interest Rate Pass-Through: Is Chile Atypical?
Author:
Mr. Alessandro Rebucci
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and
Marco A Espinosa-Vega null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 112
Language:
English
Publication Date:
01 May 2003
DOI:
https://doi.org/10.5089/9781451853629.001
ISBN:
9781451853629
ISSN:
1018-5941
Pages:
35
Keywords:
WP; rate; interest rate; lending rate; money market rate; Interest Rates; Pass-Through; Central Bank; interest rate pass-through; bank interest; loan rate stickiness; pass-through asymmetry; rate stickiness; UF rate; pass-through incompleteness; treasury bill; pass-through mechanism; banking rate; mean lag; Deposit rates; Money markets; Interbank rates; Market interest rates; Central bank policy rate; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper investigates empirically the pass-through of money market interest rates to retail banking interest rates in Chile, the United States, Canada, Australia, New Zealand, and five European countries. Overall, Chile's pass-through does not appear atypical. Based on a standard error-correction model, we find that, as in most countries considered, Chile's measured pass-through is incomplete. But Chile's pass-through is also faster than in many other countries considered and is comparable to that in the United States. While we find no significant evidence of asymmetry in Chile's pass-through across states of the interest rate or monetary policy cycle, we do find some evidence of parameter instability, around the time of the Asian and Russian crises. However, we do not find evidence that the switch to a more flexible exchange rate regime in 1999 and the "nominalization" of Chile's interest rate targets in 2001 have affected significantly the pass-through process.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund