Interest rate pass-through estimates from error correction models ECM

• Main Authors: Le Phan Thi Dieu Thao, Nguyen Thi Thu Trang
• Format: Article
• Language: English
• Published: HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE 2015-08-01
• Series: Ho Chi Minh City Open University Journal of Science - Economics and Business Administration
• Subjects: nterest rate pass-through, monetary policy, error correction model ecm
• Online Access: https://journalofscience.ou.edu.vn/index.php/econ-en/article/view/906
• ISSN: 2734-9314; 2734-9586

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.