Grigoli, Francesco.
Interest Rate Pass-Through in the Dominican Republic Francesco Grigoli. [electronic resource] / Francesco Grigoli. - Washington, D.C. : International Monetary Fund, 2015. - 1 online resource (28 p.) - IMF Working Papers . - IMF Working Papers .
A well-functioning monetary transmission mechanism is critical for monetary policy. As the Dominican Republic recently adopted an inflation targeting regime, it is even more relevant to guarantee that changes in the monetary policy rates are quickly and fully reflected in retail rates, to eventually influence aggregate demand and inflation. This paper estimates the interest rate pass-through of the monetary policy rate to retail rates and explores asymmetries in the adjustment. We find evidence of complete pass-through to retail rates, confirming the effectiveness of the monetary policy transmission mechanism. However, our results also suggest a faster pass-through to lending rates than to deposit rates and asymmetric adjustments of short-term rates, as deposit rates respond faster to policy rate cuts and lending rates respond faster to policy rate hikes. Measures to enhance competition in the financial system could help to achieve a symmetric adjustment of retail rates.
1513584391 : 18.00 USD
1018-5941
10.5089/9781513584393.001 doi
Asymmetric
Interest Rate
Pass-Through
Transmission Mechanism
Western Hemisphere
Dominican Republic
Interest Rate Pass-Through in the Dominican Republic Francesco Grigoli. [electronic resource] / Francesco Grigoli. - Washington, D.C. : International Monetary Fund, 2015. - 1 online resource (28 p.) - IMF Working Papers . - IMF Working Papers .
A well-functioning monetary transmission mechanism is critical for monetary policy. As the Dominican Republic recently adopted an inflation targeting regime, it is even more relevant to guarantee that changes in the monetary policy rates are quickly and fully reflected in retail rates, to eventually influence aggregate demand and inflation. This paper estimates the interest rate pass-through of the monetary policy rate to retail rates and explores asymmetries in the adjustment. We find evidence of complete pass-through to retail rates, confirming the effectiveness of the monetary policy transmission mechanism. However, our results also suggest a faster pass-through to lending rates than to deposit rates and asymmetric adjustments of short-term rates, as deposit rates respond faster to policy rate cuts and lending rates respond faster to policy rate hikes. Measures to enhance competition in the financial system could help to achieve a symmetric adjustment of retail rates.
1513584391 : 18.00 USD
1018-5941
10.5089/9781513584393.001 doi
Asymmetric
Interest Rate
Pass-Through
Transmission Mechanism
Western Hemisphere
Dominican Republic