Interest Rate Pass-Through in Pakistan: Evidence from the Asymmetric Co-integration Approach
This study examines the asymmetry of interest rate pass-through between wholesale (KIBOR) and retail interest rates (Deposit and Lending rate) for Pakistan, by using the asymmetric threshold co-integration proposed by Enders & Sikles (2001) and EC-EGARCH-M model proposed by Wang & Lee (2009...
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| Format: | Article |
| Language: | English |
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National University of Sciences and Technology
2021-01-01
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| Series: | NUST Journal of Social Sciences and Humanities |
| Subjects: | |
| Online Access: | https://www.njssh.nust.edu.pk/index.php/njssh/article/view/32 |
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| Summary: | This study examines the asymmetry of interest rate pass-through between wholesale (KIBOR) and retail interest rates (Deposit and Lending rate) for Pakistan, by using the asymmetric threshold co-integration proposed by Enders & Sikles (2001) and EC-EGARCH-M model proposed by Wang & Lee (2009). Empirical results of threshold co-integration test confirm that asymmetric relation exists between wholesale and retail interest rates, and hence the rate of pass-through is incomplete. Furthermore, in the long-run, retail interest rates are rigid towards the downwards adjustment, and hence there is an upward adjustment in error correction mechanism.
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| ISSN: | 2520-503X 2523-0026 |