Does foreign bank presence affect interest rate pass-through in emerging and developing economies?
Sasidaran Gopalan () and
Ramkishen Rajan ()
Journal of Macroeconomics, 2017, vol. 54, issue PB, 373-392
The impact of greater foreign bank presence on domestic monetary policy transmission has become a subject of importance for emerging and developing economies (EMDEs) as several of them have gravitated towards more market determined exchange rate regimes and consequent use of interest rates as the primary instrument for macroeconomic management. In this paper, we explore the impact of foreign bank presence on interest rate pass-through for a panel of 57 EMDEs over the period 1995–2009. Our empirical results suggest that there are strong threshold effects in terms of foreign bank presence and its impact on the strength of interest rate transmission. Foreign bank presence tends to reduce lending rates and enhance interest-rate pass-through in countries that have a relatively high degree of foreign bank presence compared to those with limited presence. On the other hand, foreign banks do not play any significant role in interest rate transmission in low threshold economies. We further find that the when foreign bank presence is associated with a decline in banking competition, it appears to lower the interest rate transmission.
Keywords: Competition; Concentration; Foreign bank presence; Interest rate pass-through; Monetary policy transmission (search for similar items in EconPapers)
JEL-codes: C23 E43 E52 F21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:54:y:2017:i:pb:p:373-392
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().