Cross-country panel analysis justifying tighter control over short-term interest rates
Batkhurel Serdavaa
International Review of Economics & Finance, 2025, vol. 98, issue C
Abstract:
These days, many central banks have achieved a high degree of control over their operational targets, and the short-term interest rates have been tightly stabilized around their target rates. The paper investigates whether such an achievement at the operational level can improve the monetary policy effectiveness, focusing on the policy rate pass-through to the bank lending rate. In doing so, the paper first shows that the policy rate pass-through to the bank lending rate improves as the interbank market interest rate is contained in a narrower band by developing a minimal static model for banks. Then, the paper empirically tests the theoretical relationship using cross-country panel data. The results consistently suggest that the credible operational framework under which the central bank consistently achieves its operational target interest rate is essential to keeping the interest rate channel effective.
Keywords: Interest rate channel; Interest rate pass-through; Monetary policy; Monetary policy operations; Cross-country panel data (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G21 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056025000310
Full text for ScienceDirect subscribers only
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:eee:reveco:v:98:y:2025:i:c:s1059056025000310
DOI: 10.1016/j.iref.2025.103868
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().