INTEREST RATE PASS-THROUGH IN TURKEY AND IMPACT OF GLOBAL FINANCIAL CRISIS: ASYMMETRIC THRESHOLD COINTEGRATION ANALYSIS

Ebru Yüksel · Kıvılcım Metin-Özcan

22 citations0/0 files storedJournal of Business Economics and Management

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Market Dynamics and Volatility

Abstract

This paper aims to investigate the interest rate pass-through of monetary policy rate to banking retail rates in Turkey by employing the asymmetric threshold autoregressive (TAR) and momentum threshold autoegressive (MTAR) procedures introduced by Enders and Siklos (2001). Over the period December 2001 to April 2011, the empirical results of asymmetric threshold cointegration analysis suggest that there exist significant and complete pass-through between policy rate and loan rates. Positive and negative departures from the equilibrium converge to long run path almost at the same speed. Pace of convergence is about two to three months for all loan rates. Policy rate has significant short run impact on loan rates. Our analysis revealed that there is no significant relationship between policy rate and bank deposit rates due to sluggish adjustment of deposit rates. Lastly, the speed and behavior of interest rate pass-through between policy rate and loan rates did not change when we encounter the effect of 2008 financial crisis. Having a banking sector dominated financial system in Turkey, the results suggest that banks adjust loan rates faster than deposit rates. This indicates that Central Bank can affect the consumption behavior of people, in other words aggregate demand through loan rates.

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References

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2017The stability of short-term interest rates pass-through in the euro area during the financial market and sovereign debt crises 2018Monetary transmission with multiple policy rates: evidence from Turkey 2015The Stability of Short-Term Interest Rates Pass-Through in the Euro Area During the Financial Market and Sovereign Debt Crises 2019Loom of Symmetric Pass-Through

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