The pass-through of the monetary policy rate into lending rates in Mexico

Alessandro Maravalle and Alberto González Pandiella

No 1734, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper estimates the pass-through of monetary policy rates into five lending rates in Mexico using auto regressive distributed lags models (ARDLs) and taking into account several financial market characteristics. Results show that the pass-through of monetary policy into the average short-term lending rate is full and fast, as it takes around 3 months to be fully transmitted. However, the pass-through is heterogeneous across credit markets, being especially weak in the mortgage and automotive credit markets. A higher market concentration in the credit sector is associated with a higher level of the corresponding lending rate. Other financial market characteristics, such as the measure of bank profitability and the ratio of capital to bank assets, are also found to affect the long-run level of one or more lending rates. Higher competition in credit markets and reducing asymmetric information would improve the transmission of monetary policy and contribute to reduce the level of lending rates.

Keywords: bank lending rates; interest rate pass-through; monetary policy; transmission mechanism (search for similar items in EconPapers)
JEL-codes: E4 E52 G21 (search for similar items in EconPapers)
Date: 2022-12-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1734-en

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