then the real interest rate must rise higher than inflation to alleviate the situation of the economy is growing hot.
Thus, when using any credit, the borrower also has to pay an additional part of the value in addition to the original loan principal. The percentage of this increase over the original loan amount is called the interest rate. Interest is the price borrowers pay to use money not owned by them and is the return the lender gets for deferring spending.
2.1.2 Types of interest rates
In the economy, there are many different types of interest rates depending on the purpose and classification criteria. In the scope of the study, interest rates are classified in two ways: according to the real value of the interest earned and according to the nature of the loan.
- Based on the real value of the profit earned:
- Nominal interest rate is the interest rate used in the borrowing relationship, which includes losses caused by inflation due to an increase in the general price level. So, nominal interest rate = real interest rate + inflation rate.
The real interest rate is the actual cost a borrower has to pay to obtain a loan. It is used by investors to calculate the real income or benefits of an economic decision.
- Depending on the nature of the loan:
- Deposit interest rate is the interest rate the bank must pay for customers' deposits in the bank. Deposit interest rates have different levels depending on deposit type and deposit time.
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Loan interest rate is the interest rate that the borrower has to pay to the bank . The lending interest rate also depends on the type of loan, the creditworthiness between the customer and the bank, the loan size and the agreement between the two parties.
- Discount interest rate is the interest rate applied when a bank lends to a customer in the form of a discount on commercial paper or other valuable papers that have not yet been due for payment by the customer. It is calculated as a percentage of the face value of the commercial paper, and is deducted as soon as the bank gives the loan to the customer. Thus, the interest rate
Discounts are paid in advance to the bank, not later like normal credit rates.
- Interbank interest rate is the interest rate at which banks lend to each other in the interbank money market. This interest rate always fluctuates up and down depending on the time of day and the ability of each bank. The Central Bank will collect the data of banks, calculate and give an average number in the morning.
- Refinancing interest rate is the interest rate at which the Central Bank lends money to credit institutions through the refinancing of signed credit contracts. When refinancing commercial banks, the central bank increased the money supply, and at the same time created the basis for commercial banks to create currency and clear their solvency. The Central Bank adjusts to increase or decrease the refinancing interest rate in accordance with the objective of tightening or expanding the currency, thereby reducing or increasing the amount of money in circulation. The central bank also uses the refinancing limit to have a direct quantitative impact on the reserves of the commercial banking system.
- Rediscount interest rate is the interest rate that the Central Bank applies to commercial banks when they borrow from discounting valuable papers that are not yet due. Rediscount activities provide capital for commercial banks, so the rediscount interest rate is usually lower than the discount rate. However, in case the central bank wants to limit the ability to expand credit to cope with inflation, the discount rate may be higher than the discount rate of commercial banks.
- Basic interest rate is the interest rate that governs all other interest rates formed in the market economy. That type of interest rate occupies an important position in the market mechanism. The interest rate is determined and announced by the Central Bank on the basis of the actual situation of the market and the target of the national monetary policy. LSCB is a tool to manage the national monetary policy. Through the LSCB, the Central Bank affects the money market, promoting, expanding or contracting credit, keeping the necessary correlation between total supply and aggregate demand for money. On the other hand, LSCB is the price for using capital in credit activities, which is the basis for forming market interest rates, ie currency trading interest rates. It is a natural compromise between the interests of depositors, borrowers and commercial banks. LSCB is determined directly from many angles. If standing on the angle
To protect the interests of customers (depositors and borrowers), minimum deposit interest rates and maximum lending rates are regulated. This means that, for the benefit of depositors, commercial banks must not lower interest rates arbitrarily and because of production development requirements, commercial banks must not increase lending rates excessively. If standing from the perspective of protecting the interests of commercial banks, creating a framework for healthy competition, and ensuring the safety of the commercial banking system, the LSCB is regulated in the opposite direction, which is the regulation of maximum deposit interest rates. and minimum lending rates. This makes commercial banks not because they want to create competitive advantages but raise deposit rates too high or lending rates too low, causing general damage to the whole system. When determining the LSCB, the overall relationship between supply and demand for capital must be taken into account through a variety of factors in normal currency trading activities. These are the average profit rate, economic growth rate, quarterly and annual forecasted inflation, positive real interest rates for depositors, cost compensation and profitability for commercial banks. monetary policy implementation from time to time, risks in credit activities, required reserve level, interest rates formed in the money market in general, correlation between domestic and foreign currency interest rates, correlation between interest rate and exchange rate...
2.1.3 Deposit rate
Deposit interest rate is the input interest rate, applied to the interest that financial institutions have to pay on customer deposits.
184.108.40.206 Structure of deposit interest rates
In addition to the factors that form deposit interest rates such as capital supply and demand, the setting of deposit interest rate policy of each bank also depends on the micro scope of the bank. The deposit interest rate depends on factors such as the nature of the mobilized money sources including the difference in time, size, depositor and purpose of deposit. Customers often rely on the reputation of the bank to choose the deposit. Therefore, large banks with high credibility will often be able to mobilize large capital at a lower cost than small banks. Besides, the apartment
Depending on the business performance, the bank must balance itself between the cost of capital mobilization with the revenue achieved when using that mobilized source to invest in order to bring maximum profit for the bank.
So, the structure of deposit interest rates:
- According to the general principle, banks mobilize at market interest rates, reflecting the supply-demand relationship in the money market. Deposit rate = average inflation rate + expected return of depositors. The depositor's rate of return depends on the risk of each bank, the rate of return on other investments, and the benefits the depositor hopes to receive from the bank.
- During the development of the financial market, the money supply from the Central Bank and other financial institutions is becoming more and more meaningful for commercial banks. Therefore, deposit interest rate = principal interest rate (discount rate, interbank interest rate, government bond interest rate...) + expected return rate of depositors.
- In the competitive environment to find capital, many banks try to save other costs (such as administrative costs) and accept a low net income ratio to increase deposit interest rates. So, deposit rate = expected rate of return on equity-financed assets – net other cost ratio allocated to capital - income tax rate and net income on capital.
- Some small banks rely on the interest rates of large banks. Depending on the specific case, this interest rate can add to the risk premium of small banks. In the condition that it is difficult for depositors to access large banks, small banks set deposit rates in correlation with profitability rates.
2.1.4 Loan interest rate
Lending interest rate is the interest rate that customers have to pay when borrowing money from the receiving financial institution.
220.127.116.11 Structure of lending interest rates
Although affected by many factors, when determining the lending interest rate, it must be based on paying the cost of capital mobilization, offsetting the management and implementation costs.
loans, cover the risks in lending activities, bring a reasonable profit for commercial banks. Besides, lending interest rates are also affected by other factors such as competition from other banks, relationship, reputation between the bank and the borrower, the purpose of using the loan, the loan term. In fact, in many countries, lending interest rates are often influenced by the short-term financial market and large commercial banks, the intervention of the Central Bank, the monetary policy is tight. tight or widen. When implementing tight monetary policy, the Central Bank will take regulatory measures to indirectly increase market interest rates in order to limit credit and increase the amount of savings deposits; and vice versa, when wanting to expand the currency, the central bank will regulate to indirectly reduce market interest rates to attract borrowers and reduce the amount of savings deposits.
Commercial banks always want to receive high interest rates when lending to fully offset the risks related to the loan and ensure the desired profit. However, the interest rate needs to be at a reasonable level to facilitate the borrower to pay the loan principal and interest without having to look to other sources of capital in the market. When competition in the credit market is increasing, commercial banks need to maintain interest rates in line with the common ground and commercial banks can only play the role of price takers but not price setters. Thus, it is necessary and important to offer a reasonable lending interest rate that can be competitive, offset risks and be profitable. So, the structure of lending interest rates:
- Based on cost aggregation: Lending interest rate = funding cost + operating costs + credit risk premium + target profit level.
Base interest rate: Base interest rate is considered the lowest interest rate that banks apply on short-term loans to customers with the highest credit quality.
Lending rate = Base rate (deposit cost, operating cost and expected return) + cost plus (credit risk premium + term risk premium).
- Based on cost - benefit: this way analyzes the profitability that customers bring to the bank.
Earnings ratio (before tax) = (Customer revenue – customer service costs) / net loan value.
If the income ratio > 0: accept the loan because the bank is profitable.
If the income ratio <=0: the loan request is denied or the bank will offer a higher loan interest rate.
2.2 Central bank interest rate policy
Interest rate policy is a part of monetary policy, is a way of managing and regulating market interest rates of the Central Bank in order to control the money supply, control inflation to achieve the goals of economic growth and stability. prices, job creation and exchange rate stability. Based on the level of development and management mechanism of the economy, the Central Bank will develop and issue an appropriate interest rate policy in two directions: direct intervention policy and interest rate liberalization policy. Direct intervention policy is the central bank's regulation of ceiling interest rates, floor rates, LSCBs, rediscount rates... to apply to activities in the money market. The policy of interest rate liberalization is a policy in which interest rates are formed on the basis of capital supply and demand in the market, but the central bank still regulates indirectly through the use of refinancing interest rates, rediscount interest rates, open market operations. When countries have pursued a policy of complete liberalization, the central bank still tries to intervene, but the intervention is market-based to manage the economy according to the objectives of monetary policy.
2.3 Transmission from central bank interest rate policy to deposit and lending rates at commercial banks
2.3.1 The concept of interest rate pass-through
Interest rate pass-through is defined as the extent and rate of change in policy rates that translates into bank retail interest rates (Rehman 2009). The pass-through of interest rates will determine the degree of market competition and the responsiveness of the financial system (Aydin, 2007; Hofmann, 2002). A faster, proportional and complete transmission will lead to a competitive, efficient and complete financial system.
Interest rate pass-through can be separated into two phases (Rehman, 2009). Stage
one measures the change of policy rates to money market rates in the short and long run, while the second shows how money market rates affect deposit rates and lending rates of banks.
According to Wang and Lee (2009), interest rate pass-through is when the central bank adjusts monetary policy, then market interest rates will be affected. Accordingly, commercial banks will transfer the increased costs due to changes in market interest rates to retail interest rates.
Thus, interest rate pass-through is the process by which the adjustment of the policy rate affects the market or retail interest rates.
2.3.2 Transmission from central bank interest rate policy to deposit and lending rates
The transmission from interest rate policy to deposit rate and lending rate is the process by which the adjustment of the refinancing interest rate, the rediscount interest rate affects the deposit and lending rates of commercial banks. . There are two levels of interest rate pass-through including complete pass-through and incomplete pass-through.
- Full pass-through implies that when the refinancing rate, the rediscount rate increases (or decreases), the deposit and lending rates also increase (or decrease). what percentage.
- Pass-through does not imply that deposit rates and lending rates adjust by less than the refinancing and rediscount rates. However, there is still the possibility of a special case where the deposit and lending rates change by a larger amount than the changes in the refinancing and rediscount rates.
2.3.3 Factors affecting interest rate pass-through
Not all economies respond equally to changes in interest rate policy. The operator will choose a transmission mechanism suitable to the characteristics of the economy to operate the interest rate policy effectively. The interest rate pass-through will be influenced by various factors such as:
- Size and openness of the economy: If the financial system has a variety of financial institutions as well as financial products, market interest rates and prices
Financial products will have to follow the law of supply and demand and be controlled by the SBV's operations without monopoly.
-The development of financial markets: When financial markets are highly developed, market interest rates and prices are determined by the market, so consumers and investment businesses are free to choose any commodity. and services at any given time. (Loayza & Hebbel, 2002)
- Dollarization: When dollarization is high, the central bank is limited in its ability to control interest rates in domestic and foreign currencies, thus reducing the level of interest rate pass-through from the central bank to commercial banks when implementing targeted policies. . The reason is due to the costs related to foreign currency that the Central Bank cannot intervene and people can convert from domestic currency to foreign currency easily when facing the disadvantage of high or low interest rates of the domestic currency.
- Quality of regulatory framework: Poor quality of regulatory framework causes asymmetric information problems and contractual constraints increase the cost of financial intermediation. This reduces demand for loans and makes interest rates less sensitive to changes in monetary policy. A stable regulatory environment helps financial and capital markets thrive, and monetary transmission is also better.
Asset quality of the financial system : Banks with poor financial health will react more slowly to changes such as increased liquidity or lower central bank interest rates with riskier actions. such as increasing interest rate band, supplementing liquidity...
- Monopolies of banks: Monopolies reduce competition among banks and erode interest rate pass-through. When banks have significant power, changes in the central bank's interest rate policy will affect the profit margins of monopolistic banks rather than affect market interest rates. In order to obtain maximum profit, the monopolistic banks will increase the lending interest rate margin and reduce the deposit interest rate margin.
The development of the financial system: The development of the financial system increases the
The level of money transmission because of the diversity of capital from different sources, the developed interbank market reduces the tendency of people to use too much cash, helping to increase the transmittance.
- Exchange rate flexibility: The central bank controls interest rates effectively when the central bank's goals are independent of exchange rate fluctuations. The fact that the Central Bank allows the exchange rate to float will make the SBV's operating interest rate the main monetary policy tool, demonstrating the independence of monetary policy. (Cas et al, 2011 and Saborowski & Weber, 2013)
- Service costs: Dutta et al, 1999 argue that commercial banks do not want to change their interest rates if the changes in the central bank's operating rates are small or temporary. The reason is due to the appearance of adjustment costs related to interest rate changes such as advertising, printing, announcement costs... Therefore, banks will react slowly to temporary changes in monetary policy. and react quickly to lasting changes in monetary policy.
- Switching costs: Heffernan, 1997 stated that customers do not like to switch financial products because they spend a lot of time, effort and inconvenience to find other better financial products. Therefore, banks can adjust deposit rates to increase and decrease lending rates more slowly, leading to asymmetry in the rate of interest rate pass-through.
- Imperfectly competitive market: Hanna & Berger, 1991 argue that there is no uniformity between banks, so interest rate adjustments in non-competitive markets may be asymmetrical.
- Asymmetric information: Stiglitz & Weis, 1981 argue that banks face adverse selection and moral hazard problems when raising lending rates and lowering deposit rates slowly to increase profits. profits for the bank itself in a short time.
Bondt  argues that it is conversion and service costs that will mainly affect the rate of interest rate adjustment in the short run, while imperfectly competitive markets and asymmetric information affect in the long run.
2.4 Previous studies on the pass-through from the central bank's interest rate policy to the deposit and lending rates at commercial banks
2.4.1 Research by Hannan and Berger (1991) and Neumark and Sharpe (1992) Hannan and Berger, Neumark and Sharpe were the first to study the rigidity of deposit rates while assuming pass-through to be completely and immediately for loan interest. Data are taken from 398 banks in the US for the period September 1983 to December 1986 to test the asymmetric effect due to the change in the interbank interest rate using the method of maximum likelihood. . The results show that there is asymmetric adjustment in deposit rates, that is, banks adjust their deposit rates more slowly than they adjust them down, and they attribute it to the market power of banks. Large goods can influence interest rates.
2.4.2 Research by Scholnick (1996)
Scholnick considers the symmetrical adjustment of deposit and lending rates in response to shocks from wholesale interest rates, assumed to be exogenous, in Singapore and Malaysia using an ECM model. The model's modified dynamic equation is: i t = 0 + 1 ∆w t + 2 R + t-1 + 3 R - t-1 +ε where i is the interest rate retail includes deposit and lending rates, w is the wholesale rate, is the symmetric adjustment rate of deposit and lending rates, R is the balance of the adjustment vectors between interest rates retail and wholesale rates. Data are monthly and studied for the period from January 1983 to November 1992 for Malaysia and January 1983 to April 1994 for Singapore. Deposit and lending rates are short-term rates, wholesale rates are interbank market rates announced by IFS. His results are consistent with the results of Hannan and Berger (1991) and Neumark and Sharpe (1992) who found that banks in both Singapore and Malaysia tend to adjust deposit rates to fall faster (about 3- 3 ). 4 months) is an upward adjustment (approximately 7 months). This provides evidence against the hypothesis that the bank will act to increase deposit rates more quickly in order to attract more depositors. The study also shows that banks in these two countries adjust
average lag is significantly slower when lending rates are above average than when lending rates are below average. That is, when there is a change in the wholesale interest rate, the lending interest rate will increase faster than decrease. These results suggest that price rigidity is the result of centralized markets, not yet expanded financial liberalization.
2.4.3 Bondt's Research (2002)
Bondt examines the relationship between the pass-through from government bond yields to deposit rates and lending rates in the euro area by comparing VAR and ECM models. The ECM model equation has the form br t = α 1 + α 2 ∆mr t – β 1 (br t-1 – β 2 mr t-1 )+ t where α 2 indicates the short-term transmission rate-term, β2indicates the long-run pass-through rate, ( 1- α 2 ) / β1indicates the average adjustment lag of interest rates deposit and lending rates to return to the equilibrium position in the long run, br is the dependent variable including deposit interest rates or lending rates, mr is the independent variable including government bond interest rates. The VAR pulse model has the form Y t = c + A i Y t-1 + t where
Data from January 1996 to January 2001 according to monthly data published by the ECB. The results in both models show that the pass-through rate through changes in government bond interest rates to banks' deposit and lending rates within one month is as high as 50%. . Interest rate pass-through is purely for long-term lending rates. In particular, the VAR model shows a faster pass-through since the introduction of the Euro.
2.4.4 Research by Beng Soon Chong, Ming-Hua Liu, Keshab Shrestha (2005)
Three authors Beng Soon Chong, Ming-Hua Liu, Keshab Shrestha study the rate of change of interest rates in response to changes in market rates across different financial institutions (in particular, commercial banks) and financial companies) and on financial products (in particular, savings deposits, deposits with different terms, lease-purchase loans, mortgages and commercial loans). The author uses the model
ECM for the period 01/1983-12/2002 in Singapore. The results show that, (i) the adjustment speed is different among financial institutions. Deposit rates of financial companies are less rigid than that of commercial banks, but their lending rates are more rigid. (ii) Adjustment speed varies across financial products. Lending rates tend to adjust more slowly than deposit rates. (iii) Loan and deposit prices are stiffer below equilibrium than above equilibrium. Therefore, it means that the money transmission rate is not uniform across all sectors of the economy and tight monetary policy takes a longer time to affect the economy than expansionary monetary policy. (iv) Financial institutions have the option of responding through value channels and lending channels. In the lending market,
2.4.5 Research by Ming-Hua Liu, Dimitri Margaritis, Alireza Tourani-Rad (2007)
Three authors Ming-Hua Liu, Dimitri Margaritis, Alireza Tourani-Rad study the pass-through and adjustment speed of commercial bank interest rates from changes in the prime interest rate in New Zealand during the period from 1994- 2004 through the OLS-VECM model. At the same time, the paper also examines the influence of policy transparency and financial structure on the contagion mechanism. New Zealand is the first country in the OECD (Organization for Economic Co-operation and Development) to adopt a clear inflation targeting policy with terms of accountability and transparency. The results show that there is no complete long-run pass-through for all types of bank interest rates. The interest rate that meets the inflation target - OCR has increased the pass-through to deposit rates, adjustable mortgage rates excluding fixed mortgage rates. Thus, the impact of monetary policy could be attenuated in a small open economy that has a substantial amount of money borrowed from abroad. Research confirms that interest rates according to monetary policy regulations have an effect
short-term interest rates and the increase in the transparency of monetary policy has reduced financial volatility and increased the operating efficiency of the policy.
2.4.6 Research by Jamilov et al (2014)
Jamilov et al (2014) studied the interest rate pass-through for five economies of the Caucasus including Armenia, Azerbaijan, Georgia, Kazakhstan and Russia through the ARDL model: i r t = α 0 + Ʃ p j=1 α j i r t-j +Ʃ q k=0 β k i p t-k +ε t where i r t is the interbank market rate or retail interest rate (deposit rate, loan interest rate), i p t is the interest rate policy. Use the Quandt-Andrews test to detect interest rate structure breaks using the F-test to pinpoint the exact time the breakout occurs. Perform ADF test to check whether the original data series is stationary or not on three data sets of pre-break, post-break and whole samples. The data used are national interest rates with data series at monthly frequency. Country Armenia uses data from January 2004 to December 2011, Azerbaijan uses data from January 2006 to December 2010, Kazakhstan uses data from January 2000 to December 2011, Georgia uses data from September 2006 to December 2011 and Russia uses data from January 2004 to December 2011. The independent variable is the official policy interest rate of central banks and the dependent variable is the interbank market rate, deposit interest rate and loan interest rate of commercial banks. As a result, interest rate pass-through is not entirely explained by macroeconomic instability in the region, volatile interest rates and inflation, and lack of competition in the banking sector. Second, the rate of interest rate adjustment to the long-run equilibrium position is very slow, indicating a high conversion cost. The third is the absence of asymmetric transmission in Armenia, Azerbaijan and Russia. Fourth is the varying degrees of pass-through for different interest rates, different countries, and the slow pace of adjustment to equilibrium. Fifth, the financial crisis of 2008 was the cause of the breakdown of interest rate structures in most countries, not just the Caucasus region. As a result, interest rate pass-through is not entirely explained by macroeconomic instability in the region, volatile interest rates and inflation, and lack of competition in the banking sector. Second, the rate of interest rate adjustment to the long-run equilibrium position is very slow, indicating a high conversion cost. The third is the absence of asymmetric transmission in Armenia, Azerbaijan and Russia. Fourth is the varying degrees of pass-through for different interest rates, different countries, and the slow pace of adjustment to equilibrium. Fifth, the financial crisis of 2008 was the cause of the breakdown of interest rate structures in most countries, not just the Caucasus region. As a result, interest rate pass-through is not entirely explained by macroeconomic instability in the region, volatile interest rates and inflation, and lack of competition in the banking sector. Second, the rate of interest rate adjustment to the long-run equilibrium position is very slow, indicating a high conversion cost. The third is the absence of asymmetric transmission in Armenia, Azerbaijan and Russia. Fourth is the varying degrees of pass-through for different interest rates, different countries, and the slow pace of adjustment to equilibrium. Fifth, the financial crisis of 2008 was the cause of the breakdown of interest rate structures in most countries, not just the Caucasus region. The third is the absence of asymmetric transmission in Armenia, Azerbaijan and Russia. Fourth is the varying degrees of pass-through for different interest rates, different countries, and the slow pace of adjustment to equilibrium. Fifth, the financial crisis of 2008 was the cause of the breakdown of interest rate structures in most countries, not just the Caucasus region. The third is the absence of asymmetric transmission in Armenia, Azerbaijan and Russia. Fourth is the varying degrees of pass-through for different interest rates, different countries, and the slow pace of adjustment to equilibrium. Fifth, the financial crisis of 2008 was the cause of the breakdown of interest rate structures in most countries, not just the Caucasus region.
2.4.7 Research by Dinh Thi Thu Hong and Phan Dinh Manh (2013)
According to Dinh Thi Thu Hong and Phan Dinh Manh, they study the interest rate transmission mechanism from policy interest rates to market interest rates to retail interest rates in Vietnam and a
several other emerging economies in Asia through testing for transmission symmetry and asymmetry using error correction model ECM; examine the impact of interest rate volatility, the rigidity in the adjustment process and the leverage effect on transmission-conductivity using the ECM-EGARCH model. Data includes 9 countries: Vietnam, China, Indonesia, Malaysia, Philippines, Singapore, Korea, Hong Kong, Thailand in the period 1/1997-12/2009 with 156 observations, only 192 observations for VN. . The experimental results show that interest rate pass-through in Vietnam does not occur completely with a symmetrical transmission mechanism. However, the rate of adjustment to the long-run equilibrium of deposit and lending rates is different in case interest rates are higher or lower than the equilibrium level. This implies that there is rigidity in adjusting deposit rates to increase and decrease lending rates. Besides, the pass-through to deposit interest rates is also negatively affected by interest rate volatility, that is, the more volatile the interest rates, the higher the risk implication, the lower the pass-through. The reason is that in this case commercial banks are afraid to adjust retail interest rates according to changes in policy interest rates due to concerns about risks and disadvantages of interest rate policy. On the other hand, a leverage effect exists on both deposit and lending rates, helping these interest rates to remain in long-run equilibrium. The reason is that in this case commercial banks are afraid to adjust retail interest rates according to changes in policy interest rates due to concerns about risks and disadvantages of interest rate policy. On the other hand, a leverage effect exists on both deposit and lending rates, helping these interest rates to remain in long-run equilibrium. The reason is that in this case commercial banks are afraid to adjust retail interest rates according to changes in policy interest rates due to concerns about risks and disadvantages of interest rate policy. On the other hand, a leverage effect exists on both deposit and lending rates, helping these interest rates to remain in long-run equilibrium.
18.104.22.168 Research by Nguyen Thi Ngoc Trang and Nguyen Huu Tuan (2014) Nguyen Thi Ngoc Trang and Nguyen Huu Tuan study the pass-through from policy interest rates (refinancing rates and interbank rates) to retail interest rates (deposit rates and lending rates) in Vietnam. using the cointegration regression method proposed by Phillips & Loretan (1991) and the distributed lagged autoregression model ARDL to determine the long-run equilibrium relationship of interest rates series. In addition, to analyze the instantaneous response of interest rates, adjustment speed to equilibrium, average adjustment delay, the author uses error correction model ECM. Research data includes domestic interbank interest rate for 3-month term, refinancing interest rate, deposit interest rate for 3-month term, and lending interest rate for less than 12 month term of 4 big commercial banks in Vietnam on average. has a controlling stake in the state
period from January 1997 to December 2012. The results show that the pass-through is incomplete from interbank and policy rates to deposit and lending rates. The study also highlights the influence of monetary policy transparency on retail interest rate pass-through from 1999 to 2012.
Table 2.1 Summary of previous studies
Hannan and Berger (1991) and Neumark
and Sharpe (1992)
The rigidity of deposit rates in the US
Asymmetric adjustment to the equilibrium position of retail interest rates
Symmetric adjustment of deposit and lending rates in response to shocks from wholesale interest rates in
Singapore and Malaysia
Beng Soon Chong, Ming-Hua Liu, Keshab Shrestha (2005)
Rate of change in interest rates in response to changes in market rates across other financial institutions and across financial products in
The relationship between the pass-through from government bond yields to deposit rates and lending rates in the euro area.
Nguyen Thi Ngoc Trang and Nguyen Huu Tuan (2014)
Pass-through from policy rates (refinancing rates and interbank rates) to interest rates
retail interest rate (deposit rate and