Interest Rate Pass-Through to Turkish Lending Rates: A Threshold Cointegration Analysis

2012-09-01
This paper aims to investigate the actual nature of the interest rate pass-through to Turkish cash, automobile, housing and corporate loan rates. Focusing on the possibility of nonlinearity in the adjustment of lending rates due to financial market conditions and monetary policies, we adopt the threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) models of Enders and Siklos (2001). Empirical results suggest substantial asymmetries (nonlinearities) in all lending rates. More specifically, banks adjust their lending rates faster in response to increases in negative discrepancies from the long-run equilibrium arising from an increase in the money market rate, while they act slowly following money market rate decreases. Furthermore, the degree of reluctance of banks to follow money market rate decreases appears to vary across lending rates, suggesting the existence of sectoral heterogeneities besides asymmetries.
Economic Research Center Working Papers in Economics

Suggestions

Asymmetric Interest Rate Pass-Through to Turkish Loan Rates
Yıldırım Kasap, Dilem (2014-01-01)
This paper aims to investigate the actual nature of the interest rate pass-through to Turkish cash, automobile, housing and corporate loan rates. Focusing on the possibility of nonlinearity in the adjustment of lending rates due to financial market conditions and monetary policies, we adopt the threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) models of Enders and Siklos (2001). Empirical results suggest substantial asymmetries (nonlinearities) in all lending rates. More specifical...
A threshold cointegration analysis of interest rate pass-through to UK mortgage rates
Becker, Ralf; Osborn, Denise R.; Yıldırım Kasap, Dilem (2012-11-01)
This paper empirically analyses the interest rate transmission mechanism in the United Kingdom by exploring the pass-through of the official rate to the money market rate and of the market rate to the mortgage rate. Potential asymmetries, due to financial market conditions and monetary policy, lead to the use of a nonlinear threshold error-correction model, with hypothesis tests based on nonstandard bootstrap procedures that take into account the discrete nature of changes in the official rate. The empirica...
Non-linear structure of the Turkish interest rate transmission mechanism
Bozok, İhsan; Yıldırım Kasap, Dilem; Department of Economics (2012)
This paper empirically analyses the interest rate transmission mechanism from money market rate to lending rate by utilizing the bank-level data in the distinction of cash, automobile, housing and corporate loans in Turkey. The main objective is to reveal the possible asymmetries of the adjustment process as well as the extent of the pass through. Empirical results indicate that mark-up value is the minimum for corporate rates on average, followed by housing, automobile and cash rates, respectively. Additio...
Interest Rate Smoothing and Macroeconomic Instability under Post-Capital Account Liberalization Turkey
Cömert, Hasan; Olcum, Gokce Akin (2010-01-01)
This paper considers the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) in the post-financial liberalization and deregulation era. We find that (1) the Bank's interest rate smoothing tendency is the main determinant of its monetary policy in this period, (2) the CBRT does not seem to be responsive to the developments in real economy (output), and (3) although inflation targeting central banks are not supposed to pay attention to exchange rates, the CBRT appears to be slightly resp...
Debt sustainability and the exchange rate: The case of Turkey
Keyder, Nur (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2003-6-1)
The paper attempts to estimate the primary surplus requirement for debt sustainability in Turkey, taking into consideration not only the operational deficit and seigniorage factors but also the exchange rate factor. In estimations, a modified version of the approach suggested by the World Bank (World Bank, 2000, “Turkey-Country Economic Memorandum-Structural Reforms for Sustainable Growth, Vol. I and II”, Report No. 20657-TU, Washington, DC, 16-18; 121-4) is used. The analysis is carried out in two steps. F...
Citation Formats
D. Yıldırım Kasap, “Interest Rate Pass-Through to Turkish Lending Rates: A Threshold Cointegration Analysis,” Economic Research Center Working Papers in Economics, pp. 1–20, 2012, Accessed: 00, 2021. [Online]. Available: http://erc.metu.edu.tr/en/system/files/menu/series12/1207.pdf.