THE INTEREST RATE PASS-THROUGH: AN EMPIRICAL STUDY OF SEVEN ASIAN ECONOMIES

Chris C. Hsu

Global Journal of Business Research, 2017, vol. 11, issue 2, 1-10

Abstract: This paper examines the extent of interest rate pass-through in seven Asian economies including Indonesia, Korea, the Philippines, Singapore, Thailand, Hong Kong, and Taiwan. The data selected ranges from after the 1997 Asian financial crisis to right before the 2008 financial turmoil and examines the question of whether these Asian economies’ banking systems have recovered and become stronger since the 1997 financial crisis. The Error Correction Model was adopted in the study, and the empirical results suggested that banks adjust the markets to their retail rates with some levels of delay and the extent of the adjustments in intermediate and long-term pass-through vary depending on the nature of financial instruments and the length of their maturities. In general, countries with more highly developed financial markets usually respond to market conditions more actively and fully, while countries with less developed financial markets tend to have a longer adjustment process. Lending rates are usually stickier than deposit rates in the countries studied

Keywords: Interest Rate Pass-Through; Error Correction Model; Emerging Markets; Comparable Market Interest Rate (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:gjbres:v:11:y:2017:i:2:p:1-10

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