Economic Issue Paper.pdf (538.61 kB)
Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis?
journal contribution
posted on 2014-01-23, 15:28 authored by Ahmad Hassan AhmadAhmad Hassan Ahmad, Nusrate Aziz, Shahina RummunInterest 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.
History
School
- Business and Economics
Department
- Economics
Citation
AHMAD, A.H., AZIZ, N. and RUMMUN, S., 2013. Interest rate pass-through in the UK: has the transmission mechanism changed during the financial crisis? Economic Issues, 18 (1), pp. 17 - 38.Publisher
© Economic IssuesVersion
- VoR (Version of Record)
Publication date
2013Notes
This article was published in the journal Economic Issues [© Economic Issues]. It is also available at: http://www.economicissues.org.uk/Files/2013/113Ahmad.pdfISSN
1363-7029Publisher version
Language
- en