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I contribute to the ongoing policy discourse on the challenges of monetary policy transmission in environments with consolidated financial sectors and high credit rates. I empirically investigate the lending rate pass-through in Azerbaijan – a small resource-rich economy in transition – by taking advantage of a unique set of high-frequency bank-level data. My bottom-line policy message is the following. First, lending rates are considerably irresponsive to monetary policy shocks, and the interest rate channel ought to be somehow improved. Second, macroeconomic fundamentals and the concentrated bank sector are surprisingly not among the reasons behind the policy-market disconnect. Third, domestic commercial banks are able to exert substantial monopolistic pricing capacities and keep credit rates high, particularly when the central bank loosens its policy stance. Fourth, the underlying cause of both monetary policy inefficacy and high interest rate stickiness appears to be structural excess liquidity. In fact, empirical results show that pass-through is substantially higher for less liquid banks. Extraction of excess liquidity from the system should mitigate the banks’ monopolistic pricing powers, improve the efficiency of the interest rate channel, and ultimately bring the credit rates down.

This study aims to quantitatively measure the size and speed of monetary policy interest rate transmission to long‐term interest rates in Kenya.

The study uses autoregressive distributed lag specification re‐parameterized as an error correction model and mean adjustment lag methods.

The study finds incomplete pass‐through of policy rates both in the short and the long run. The study also shows that it takes approximately between 11 months to two years for policy interest rate to be fully transmitted to long‐term rates.

The study is novel as it is the first attempt the authors are aware of that empirically investigates the interest rate pass‐through in Kenya using high‐frequency data. Measuring the speed and size of interest rate pass‐through provides policy makers with insights on how long it takes for a particular policy action to yield desired results on the real economy. The findings of this study will therefore inform policy makers of the effectiveness of their policy decisions and facilitate timely monetary policy actions.

The authors examine the interest rate pass-through in Hong Kong (HK) and Macao both in the long term and short term.

The authors use time series methodology, i.e. unit root, cointegration and error correction models.

The results show that in the post-global financial crisis (GFC) period, both the long-run and short-run interest rate pass-through from policy rates to prime rates have disappeared in Macao and are weakened significantly in Hong Kong. The long-term relationship between deposit rates and policy rates no longer exists in either market while the short-term relationship has been reduced significantly.

The results indicate that the effectiveness of monetary policy in HK and Macao has been seriously undermined in the post-GFC period. New tools are needed in both regions.

Monetary policy transmission via bank interest rates in both HK and Macao are no longer effective after the outbreak of the GFC.

Effort to stimulate the economy and/or control inflation will be hampered.

To the best of the authors’ knowledge, this is the first study to examine the impact of the GFC on the effectiveness of monetary policy transmission in HK and Macao.

The purpose of this paper is to examine and compare the interest rate pass-through among the Brazil, Russia, India, China and South Africa (BRICS) emerging markets.

The paper reviews a general literature on interest rates pass-through by applying a cointegration and asymmetric mean adjustment lag (MAL) error correction methodology (ECM).

A symmetric adjustment is found in Russia, China and South Africa's deposit rate, while an asymmetric adjustment is found in Brazil and India's deposit rate adjustments. The presence of a customer reaction theory is found in Brazil, India, China and South Africa's deposit rate adjustments, while a collusive pricing arrangement is found in Russia. From the lending rate adjustment, a collusive pricing arrangement was found in Brazil, China and South Africa, while a customer reaction theory was found in India and Russia.

The sample period used in the study covers a period starting from the formal recognition of BRIC (2001-2010), which limits the data length.

The research output and implication can assist monetary policy makers, investors and consumers to monitor BRICS’ central banking, commercial banking and competition behaviour, individually and as a group. The BRICS are potentially heading towards a more financially integrated bloc as multilateral agreements among members increases. This is in the form of Letters of Credit and Memorandum of Understanding. These agreements should boost intra-BRICS financial transactions, investments and trade.

This is, to the best of knowledge, the first analysis of BRICS interest rate pass-through using the asymmetric MAL ECM application.

This paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.

Symmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.

The findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.

Even though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.

To the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

The transmission of monetary policy rates to lending rates is viewed as a crucial path of monetary policy. As an integral part of the financial system and the recent financial crisis, securitized assets have the potential to affect the interest rate pass-through process and monetary policy effectiveness. This paper aims to investigate the influence of securitization on the transmission of policy rate changes to lending rates and how rate transmission has changed since the recent financial crisis. Emphasis is placed on differences among the mortgage, consumer credit and business loan securitization markets and between agency and private-label securitization transactions.

The empirical framework is an error-correction model augmented to directly measure the influence of securitization. Monetary policy effectiveness is measured by the size and speed of transmitted policy rate changes to lending rates. An efficiency measure of relative adjustment accounts for differences in the size of long-run responses across loan markets and changes in efficiency from securitization within loan markets.

The size and speed of interest rate pass-through tend to increase with securitization. Liquidity, capital relief and funding from securitization help to make lending rates more responsive. Increases in pass-through with securitization are less in the consumer credit and business loan markets after the recent financial crisis relative to before the crisis. In contrast, mortgage markets tend to have larger pass-through after the financial crisis. Differences in rate transmission after the recent financial crisis point to the role on nonbanks in consumer credit and business loans and asset purchase programs of the Federal Reserve in mortgage markets. Securitization tends to make the adjustment process more efficient, and gains in efficiency from securitization are larger after the financial crisis.

A key contribution of the study differentiates securitization across markets and types to determine the effects on the interest rate pass-through process. The results show that increases in the efficiency of the adjustment process from securitization tend to be greater in mortgage markets and for all private-label securitized assets. These findings have implications for proposed government-sponsored entity (GSE) reform to reduce the role of GSEs in the housing market, promote private-label mortgage credit and strengthen securitization deals.

If banks solve an inter-temporal problem under adverse selection and moral hazard, then bank specific factors, regulatory and supervisory features, market structure, and macroeconomic factors can be expected to affect banks’ loan interest rates and their spread over deposit interest rates. To examine interest rate pass-through for Indian banks in a period following extensive financial reform, after controlling for all these factors, we estimate the determinants of commercial banks’ loan pricing decisions, using the dynamic panel data methodology with annual data for a sample of 33 banks over the period 1996–2012. Results show commercial banks consider several factors apart from the policy rate. This limits policy pass-through. More competition reduces policy pass-through by decreasing the loan rate as well as spreads. If managerial efficiency is high then an increase in competition increases the policy pass-through and the vice-versa. Reform has had mixed effects, while managerial inefficiency raised rates and spreads, product diversification reduced both. Costs of deposits are passed on to loan rates. Regulatory requirements raise loan rates and spreads.

In this study, it is analyzed the validity of the exchange rate pass-through (ERPT) effect and the effect of interest rate and output level on the inflation rate (IR) in Brazil, Russia, India, China and Turkey (BRIC-T) between the years 1995Q1 and 2022Q4.

The methods such as the panel unit root test developed by Westerlund (2012), the LM bootstrap panel cointegration test developed by Westerlund and Edgerton (2007), the common correlated effects (CCE) estimator developed by Pesaran (2006) and the augmented mean group (AMG) estimator developed by Eberhardt and Bond (2009) that take into account the cross-section dependency are applied for analysis.

As a result of the findings, it is determined that the ERPT effect is valid in Turkey, Brazil, Russia, India and China and the cost channel is valid only in China. Finally, it is found out that output level positively affects inflation in Turkey, Brazil, Russia, India and China.

All these results indicate that the economies of Turkey, Russia, Brazil and India have a fragile structure, especially in terms of inflation. Therefore, the central bank of these countries should maintain exchange-rate stability to implement the inflation-targeting strategy successfully. In this context, central bank independence should be increased in these countries in achieving this objective. Also the results indicate that it is still early to consider whether BRIC-T countries and accordingly the Belt and Road Initiative will be an alternative against the domination of the USA and European Union (EU) on international trade system or it will substitute them.

In this study, it is tested that the impact of interest-rate (NIR), exchange-rate (FER) and output level (IPI) on general level of prices. Besides, it is analyzed that whether production level affects the IR. Also, the study investigates the economic issues such as ERPT effect and cost channel. The study analyzes whether China's Belt and Road Initiative is successful or not. In this study, we used the panel data methods that allow for structural breaks and cross-section dependency. For these reasons, this study differs from other studies in the literature both in terms of scope and methods used.

The paper investigates the interest rate policy transmission mechanism and the role of market structure of the banking industry in Qatar.

Competitiveness indexes are used to measure the degree of market power in the banking industry in Qatar. The momentum threshold autoregressive model is applied over the monthly period from January 2005 to June 2018 to examine the magnitude of intermediation and adjustment to disequilibria in the deposit market. In addition, to model interest rate volatility and overcome the problem of heteroscedastic errors in the error correction standard models, an asymmetric EC-EGARCH-M model is applied.

The findings suggest incomplete pass-through and asymmetric response to monetary shocks. The asymmetric adjustment mechanism is found to be downward rigid which suggests a high degree of customer sophistication and an elastic supply of deposits. The results of the EC-EGARCH-M show that the impact of monetary policy shocks has a significant positive impact on deposit interest rates and that negative monetary shocks trigger more conditional interest rate volatility in the next period than positive monetary shocks for a short maturity rate.

The paper is the first to highlight the behaviour of the interest rate pass through channel and measures the degree of competitiveness of the banking industry for the case of a small, rich country. In addition, using recent data, the paper applies different econometric methodologies and overcomes the problem of heteroskedastic errors by modelling the interest rate volatility using the EC-EGARCH-M model.

On May 24, 2019, the People’s Bank of China (China’s central bank) announced that the Baoshang Bank had been taken over because of credit risk. The Baoshang Bank failure has caused concerns over the stability of the Chinese financial system and the Chinese economy. This study aims to examine the case of Baoshang Bank’s failure and its theoretical implications including the relation between ownership structure and bank performance, the monetary transmission during a banking crisis and the market response to Baoshang Bank failure. Then this study discusses policy implications.

This study adopts a two-stage least squared model to examine the relation between ownership structure and bank performance, a series of rolling regressions to examine the monetary transmission and event studies to examine the market response to Baoshang Bank failure.

This study finds that there is a nonlinear relation between ownership structure and bank performance, the interest pass-through has broken down after the Baoshang Bank failure and the Baoshang Bank failure and the gradual exit of implicit guarantee from the Chinese government are considered to be positive to the Chinese banking sector.

First, although previous studies on ownership structure and bank performance classified different types of larger shareholders and found that this nonlinear relation is insignificant, this study finds a significant relation by innovatively using a combined ownership. Second, further contributing to the studies on monetary transmission in banking crisis based on international data, this study based on Chinese data sets finds that the interest rate pass-through has broken down after the Baoshang Bank failure.