Asymmetric Adjustment in the Lending-Deposit Rate Spread: Evidence from Eastern European Countries

Chi Wei Su () and Hsu Ling Chang
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Chi Wei Su: Department of International Trade, Tamkang University; Department of Finance, Xiamen University; Taipei, Taiwan. Phone: +886-4-22920677. Address: No.151, Yingzhuan Rd., Danshui Town, Taipei County 25137, Taiwan (R.O.C.)
Hsu Ling Chang: Department of Accounting and Information, Ling Tung University; Department of Finance, Xiamen University; Taipei, Taiwan.

Journal for Economic Forecasting, 2010, issue 2, 165-175

Abstract: This study carries out an examination of the potential non-linear cointegration between the lending and deposit rates of eight Eastern European countries using the threshold models by Enders and Granger (1998) and Enders and Siklos (2001). Based upon our adoption in this study of the threshold error-correction model (TECM), we find solid evidence of an asymmetric price transmission effect between the lending and deposit rates. Thus, our results reveal that there are indeed such long-run non-linear cointegration relationships between the lending and deposit rates in these Eastern European countries. Furthermore, we go on to successfully capture the dynamic adjustment of the spread.

Keywords: Lending-Deposit Rates Spread; Threshold Model; Threshold Error- Correction Model (TECM) (search for similar items in EconPapers)
JEL-codes: C22 E43 G12 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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