Arbeitspapier
Interest rate pass-through: A nonlinear vector error-correction approach
This paper analyzes pass-through from money market rates to consumer retail loan and deposit rates in Canada from 1983 to 2015 using a nonlinear vector error-correction model. In contrast to empirical frameworks used in previous studies, this model permits estimation of long-run pass-through coefficients while simultaneously accounting for asymmetric adjustments and short-run dynamics. It also allows testing of commonly made assumptions such as exogeneity of the market rate. I find that pass-through was complete for all rates before the financial crisis although only after the mid 1990s for the 1 year mortgage rate. Since the end of the 2008-09 recession, pass-through remains complete in the mortgage market but has significantly declined for deposit rates. Furthermore, many rates adjust asymmetrically but the direction of rigidity differs among rates and time periods.
- Language
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Englisch
- Bibliographic citation
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Series: Queen's Economics Department Working Paper ; No. 1352
- Classification
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Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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Interest rate pass-through
cointegration
asymmetric adjustment
nonlinear vector error-correction model
- Event
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Geistige Schöpfung
- (who)
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Popiel, Michal
- Event
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Veröffentlichung
- (who)
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Queen's University, Department of Economics
- (where)
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Kingston (Ontario)
- (when)
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2015
- Handle
- Last update
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10.03.2025, 11:41 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Popiel, Michal
- Queen's University, Department of Economics
Time of origin
- 2015
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