Interest rate pass-through in Morocco: Evidence from bank-level survey data

Hicham Bennouna

Economic Modelling, 2019, vol. 80, issue C, 142-157

Abstract: We investigate the relationship between banks’ marginal cost and retail lending rates in Morocco. The data covers the rates of new business loans for four market segments broken down by institutional sector between 2006Q2 and 2016Q4. We examine the pass-through mechanism using recently developed heterogeneous panel cointegration framework. Our findings suggest that there is a high degree of pass-through heterogeneity over bank products. The weak adjustment for short-term credit facilities and consumption loans can be explained by credit risk compensation allowing banks to reduce their exposition to systemic risks. Corporate loans are priced more competitive than household and individual entrepreneur products, suggesting that negotiation power or the competition from the borrower side matters. Overall, our results indicate that banking market contestability has improved during the last decade.

Keywords: Retail lending rates; Pass-through; Heterogeneity; Panel cointegration (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:80:y:2019:i:c:p:142-157

DOI: 10.1016/j.econmod.2018.11.003

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