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5 (1) 2015

Interest rate pass-through estimates from error correction models ECM


Author - Affiliation:
Le Phan Thi Dieu Thao - Banking University Ho Chi Minh City , Vietnam
Nguyen Thi Thu Trang - OceanBank , Vietnam
Corresponding author: Le Phan Thi Dieu Thao - dieuthaodhnh@gmail.com

Abstract
This paper examines the degree of pass-through and adjustment speed of retail interest rates in response to changes in monetary policy rates in commercial banks of Viet Nam during the period 07/2004 to 06/2014. The results show that the degree of pass-through of retail interest rates is incomplete but high (0.7-0.93). The adjustment speed of money market rates & retail interest rates is relatively slow. It takes from 3 to 6 months for money market rates & retail interest rates to be adjusted to long-term equilibrium, except 1 month VNIBOR. 1 month VNIBOR is sensitive to changes of discount rate & refinancing rate in short-term, contrary to 3 month VNIBOR . The degree of pass-through from market rates to retail interest rates is fairly high in the long-term but low in the short-term. The degree of pass-through is different between various retail interest rates. Specifically, the degree of pass-through of deposit rates is higher than that of lending rates both in the short-term & long-term.

Keywords
nterest rate pass-through, monetary policy, error correction model ECM

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DOI: https://doi.org/10.46223/HCMCOUJS.econ.en.5.1.906.2015
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