The Interest Rate Pass-Through in Malaysia: An Analysis on Asymmetric Adjustment
The interest rate channel is the primary and most important mechanism for policymakers. Knowledge of the pass-through of interest rates has allowed policymakers to draw conclusions on how fast and to what extent a shock in policy rates are transmitted to retail rates. This paper investigates the...
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| Main Authors: | , , |
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| Format: | E-Article |
| Language: | English |
| Published: |
Universiti Putra Malaysia
2015
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| Subjects: | |
| Online Access: | http://ir.unimas.my/id/eprint/18008/1/The%20Interest%20Rate%20Pass-Through%20in%20Malaysia%20%28abstract%29.pdf http://ir.unimas.my/id/eprint/18008/ http://www.econ.upm.edu.my/ijem |
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| Summary: | The interest rate channel is the primary and most important mechanism
for policymakers. Knowledge of the pass-through of interest rates has
allowed policymakers to draw conclusions on how fast and to what
extent a shock in policy rates are transmitted to retail rates. This paper
investigates the pass-through effect of policy rate on retail rates in
Malaysia. Asymmetric threshold autoregressive (TAR) and
momentum threshold autoregressive (MTAR) proposed by Enders and
Siklos (2001) are employed in the study. Over the period of January
1987 to December 2014, the policy rate was found to be an incomplete
pass-through to deposit and lending rates. Based on the asymmetric
analysis, we discover the asymmetry effects in the response of retail
rates to the change of policy rate. In addition, we find downward
rigidity in both deposit and lending rates. |
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