Determinants of Interest Rate Pass-Through: Do Macroeconomic Conditions and Financial Market Structure Matter?

Nikoloz Gigineishvili

No 2011/176, IMF Working Papers from International Monetary Fund

Abstract: Numerous empirical studies have found that the strength of the interest rate pass-through varies markedly across countries and markets. The causes of such heterogeneity have attracted considerably less attention so far. Unlike other studies that mainly focus on small groups of mostly developed and emerging markets in the same region, this paper expands the cross-sectional coverage to 70 countries from all regions, including low income, emerging and developed countries. It uses a wide range of macroeconomic and financial market structure variables to uncover structural determinants of pass-through. The paper finds that per capita GDP and inflation have positive effects on pass-through, while market volatility has a negative effect. Among financial market variables exchange rate flexibility, credit quality, overhead costs, and banking competition were found to strengthen pass-through, whereas excess banking liquidity to impede it.

Keywords: WP; interest rate; pass-through; pass-through coefficient; Interest rate pass-through; transmission mechanism; monetary policy; money market rate; unit interest rate elasticity; exchange regime; interest rate channel; Money markets; Inflation; Market interest rates; Loans; Credit; Middle East; Middle East and Central Asia (search for similar items in EconPapers)
Pages: 19
Date: 2011-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25096 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2011/176

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().