Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?

Interest rate has been the monetary policy tool used by the modern central banks. For monetary policy to be effective, changes in the policy rate should influence the short-term money market rate and retail rates. Using an error correction methodology, this paper examines the short-run and long-run...

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Main Authors:	Ahmad Hassan Ahmad, Nusrate Aziz, Shahina Rummun
Format:	Default Article
Published:	2013
Subjects:	Other economics not elsewhere classified untagged Economics Economics not elsewhere classified
Online Access:	https://hdl.handle.net/2134/14018
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id	rr-article-9494231
record_format	Figshare
spelling	rr-article-94942312013-01-01T00:00:00Z Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis? Ahmad Hassan Ahmad (1249758) Nusrate Aziz (6735638) Shahina Rummun (7195934) Other economics not elsewhere classified untagged Economics Economics not elsewhere classified Interest rate has been the monetary policy tool used by the modern central banks. For monetary policy to be effective, changes in the policy rate should influence the short-term money market rate and retail rates. Using an error correction methodology, this paper examines the short-run and long-run dynamics of interest rate pass through from the LIBOR to four different UK retail rates. The results indicate that interest rate pass-through in the UK is incomplete in the short run, but fairly complete in the long-run and the adjustment of retail rates depend on whether they are below or above their respective long-run values. The results also indicate a temporary, but statistically significant change in the interest rate pass-through since the beginning of the financial crisis in 2007. 2013-01-01T00:00:00Z Text Journal contribution 2134/14018 https://figshare.com/articles/journal_contribution/Interest_rate_pass-through_in_the_UK_has_the_transmission_mechanism_changed_during_the_financial_crisis_/9494231 CC BY-NC-ND 4.0
institution	Loughborough University
collection	Figshare
topic	Other economics not elsewhere classified untagged Economics Economics not elsewhere classified
spellingShingle	Other economics not elsewhere classified untagged Economics Economics not elsewhere classified Ahmad Hassan Ahmad Nusrate Aziz Shahina Rummun Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
description	Interest rate has been the monetary policy tool used by the modern central banks. For monetary policy to be effective, changes in the policy rate should influence the short-term money market rate and retail rates. Using an error correction methodology, this paper examines the short-run and long-run dynamics of interest rate pass through from the LIBOR to four different UK retail rates. The results indicate that interest rate pass-through in the UK is incomplete in the short run, but fairly complete in the long-run and the adjustment of retail rates depend on whether they are below or above their respective long-run values. The results also indicate a temporary, but statistically significant change in the interest rate pass-through since the beginning of the financial crisis in 2007.
format	Default Article
author	Ahmad Hassan Ahmad Nusrate Aziz Shahina Rummun
author_facet	Ahmad Hassan Ahmad Nusrate Aziz Shahina Rummun
author_sort	Ahmad Hassan Ahmad (1249758)
title	Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
title_short	Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
title_full	Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
title_fullStr	Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
title_full_unstemmed	Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
title_sort	interest rate pass-through in the uk: has the transmission mechanism changed during the financial crisis?
publishDate	2013
url	https://hdl.handle.net/2134/14018
_version_	1797559259062337536

Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?

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