9th EBES Conference, Rome, Italy, 11 - 13 January 2013, pp.93
This paper aims to investigate the actual
nature of the interest rate pass-through to Turkish cash, automobile, housing
and corporate loan rates. Focusing on the possibility of nonlinearity in the
adjustment of lending rates due to financial market conditions and monetary
policies, we adopt the threshold autoregressive (TAR)
and momentum threshold autoregressive (MTAR) models of Enders and Siklos (2001). Empirical
results suggest substantial asymmetries (nonlinearities) in all lending rates. More specifically, banks
adjust their lending rates faster in response to increases in negative discrepancies from the long-run equilibrium
arising from an increase in the money market rate, while they act slowly
following money market rate decreases. Furthermore, the degree of reluctance of
banks to follow money market rate decreases appears to vary across lending
rates, suggesting the existence of sectoral heterogeneities besides
asymmetries.