Effect of the Monetary Policy Reference Rate on the Financial System Interest Rates: Evidence for Colombia
DOI:
https://doi.org/10.17533/udea.le.n100a353826Keywords:
Monetary Policy effectiveness, Banco de la República, ass-through and contemporaneous effect, cointegration, lineal ECMAbstract
Central Banks have as their primary objective price stability. To this end, the central banks follow a Monetary Policy rule that is managed autonomously and independently, and its main tool is the Monetary Policy reference rate. The effectiveness of the monetary policy to assess price stability will depend on how quickly the local financial system reacts to movements in the reference rate. The aim of this paper is to evaluate the effectiveness, temporal and contemporaneous, of the Central Bank of Colombia; to do so, a linear Error Correction Model (ECM) is used for the period of May 2002 to April 2023. Results suggest that the pass-through effect is greater in active interest rate rather than the passive interest rate. Regarding the speed of transmission: i) short term interest rates adjust in less time, especially corporative rates, and passive rates, than long term interest rates and ii) deposit interest rates adjust faster than lending interest rates.
Downloads
References
Andújar, J. (2012). Efecto traspaso de tasas de interés: análisis econométrico de los efectos de las decisiones de política monetaria en República Dominicana. Revista Finanzas y Política Económica, 4(2), 83-101. https://doi.org/10.14718/revfinanzpolitecon.v4.n2.2012.463
Astudillo, A., Arriagada, F., Astudillo, F., & Jabreger, F. (2021). Rezago y magnitud del traspaso de la tasa de interés de política monetaria a las tasas de interés de mercado. Trilogía, 36(47), 12-32. https://trilogia.utem.cl/?p=876
Banco de la República. (2002, 9 de julio). Informe sobre Inflación. Marzo 2002. https://www.banrep.gov.co/es/informe-sobre-inflacion-marzo-2002
Banco de la República. (2023, 2 de agosto). Informe de Política Monetaria. Julio 2023. https://www.banrep.gov.co/es/publicaciones-investigaciones/informe-politica-monetaria/julio-2023
Banerjee, A., Dolado, J., Galbraith, J., & Hendry, D. (1993). Cointegration, Error Correction and the Econometric Analysis of Non-Stationary Data. Oxford University Press.
Bardsen, G. (1989). Estimation of Long Run Coefficients in Error Correction Models. Oxford Bulletin of Economics and Statistics, 51(2). https://doi.org/10.1111/j.1468-0084.1989.mp51003008.x
Barquero, J., & Mora, D. (2015). El efecto traspaso de la tasa de interés de los instrumentos del Banco Central en Costa Rica hacia las tasas de interés del sistema financiero. Revista de Ciencias Económicas, 33(1), 37-61. http://dx.doi.org/10.15517/rce.v33i1.19966
Betancourt, R., Rodríguez, N., & Vargas, H. (2008). Interest Rate Pass-Through in Colombia: A Micro-Banking Perspective. Cuadernos de Economía, 45(131), 29-58. https://www.jstor.org/stable/41951853
Borio, C., & Fritz, W. (1995). The Response of Short-Term Bank Lending Rates to Policy Rates: A Cross-Country Perspective [BIS working paper No. 27]. https://www.bis.org/publ/work27.htm
Campbell, J., & Shiller, R. (1987). Cointegration and Tests of Present Value Models. Journal of Political Economy, 95(5), 1062-1088. https://www.jstor.org/stable/1833129
Canova, F., & Hansen, B. (1995) Are Seasonal Patterns Constant over Time? A test for Seasonal Stability. Journal of Business and Economics Statistics, 13(3), 237-252. https://doi.org/10.2307/1392184
Carranza, I., Cristiano, D., González., E., & Huertas, C. (2021). La transmisión de los cambios en la tasa de interés de política monetaria (TPM) hacia las tasas de interés de los establecimientos de crédito (EC). Informe de Política Monetaria, 46-52. https://repositorio.banrep.gov.co/bitstream/handle/20.500.12134/10012/informe-politica-monetaria-abril-2021-recuadro1.pdf?sequence=6&isAllowed=y
Chavarro-Sánchez, X., Cristiano-Botia, D., Gomez-Gonzalez, J., González-Molano, E., & Huertas-Campos, C. (2015). Evaluación de la transmisión de la tasa de referencia a las tasas de interés del sistema financiero. Borradores de Economía. 874. https://www.banrep.gov.co/es/borrador-874
Cottarelli, C., & Kourelis, A. (1994). Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy. IMF Staff Paper 41(4). 587-623. https://doi.org/10.2307/3867521
Dancourt, O. (2012). Crédito bancario, tasa de interés de política y tasa de encaje en el Perú [documentos de trabajo No. 342]. Departamento Académico de Economía. Pontificia Universidad Católica del Perú. https://departamento.pucp.edu.pe/economia/documento/credito-bancario-tasa-de-interes-de-politica-y-tasa-de-encaje-en-el-peru/
Elliot, G., Rothenberg, T., & Stock, J. (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, 64(4), 813-836. https://doi.org/10.2307/2171846
Engle, R., & Granger, C. (1987). Cointegration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55(2), 251-276. https://doi.org/10.2307/1913236
Engle, R., & Granger, C. (1991). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2), 231-54. https://doi.org/10.1016/0165-1889(88)90041-3
Espinosa, M., & Rebucci, A. (2003). Retail Bank Interest Rate Pass-Through: Is Chile Atypical? [IMF Working Papers No. 112]. https://doi.org/10.5089/9781451853629.001
Galindo, A., & Steiner, R. (2022). Asymmetric interest rate transmission in an inflation targeting framework: The case of Colombia. Latin American Journal of Central Banking. 3(3). 1-18. https://doi.org/10.1016/j.latcb.2022.100069
Hendry, D. (1995). Dynamic Econometrics. Oxford University Press.
Huertas, C., Jalil, M., Olarte, S., & Romero, J. (2005). Algunas consideraciones sobre el canal de crédito y la transmisión de tasas de interés en Colombia. Borradores de Economía. 932. https://publicaciones.banrepcultural.org/index.php/banrep/article/view/9775/10166
Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12(2-3), 231-254. https://doi.org/10.1016/0165-1889(88)90041-3
Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica 59(6), 1551-1580. https://doi.org/10.2307/2938278
Julio, J. (2001). Relación entre la tasa de intervención del Banco de la República y las tasas de mercado: una exploración empírica. Borradores de Economía. 188. https://www.banrep.gov.co/sites/default/files/publicaciones/pdfs/borra188.pdf
Juselius, K. (2006). The Cointegrated VAR model: Methodology and Applications. Oxford University Press.
Lahura, E. (2017). El efecto traspaso de la tasa de interés de política monetaria en Perú: Evidencia reciente. Revista de Estudios Económicos, 33, 9-27. https://econpapers.repec.org/article/rbpesteco/ree-33-01.htm
Lucas, R. (1976). Econometric Policy Evaluation: A Critique. Carnegie-Rochester Conference Series on Public Policy, 1, 19-46. https://doi.org/10.1016/S0167-2231(76)80003-6
Lütkepohl, H. (2006). New Introduction to Multiple Time Series Analysis. Segunda edición. Springer.
Moazzami, B. (1999). Lending Rate Stickness and Monetary Transmission Mechanism: The case of Canada and the United States. Applied Financial Economics, 9(6), 533-538. https://doi.org/10.1080/096031099331989
Montoya, M. (2023). Tesorería Nacional y Banco de la República: evidencia de la Teoría Monetaria Moderna en Colombia (2007-2018). Lecturas de Economía, 98(1), 97-129. https://doi.org/10.17533/udea.le.n98a347832
Phillips, P., & Hansen, B. (1990). Statistical Inference in Instrumental Variables Regression with I(1) Processes. Review of Economic Studies, 57(1), 99-125. https://doi.org/10.2307/2297545
Rhenals, R., & Saldarriaga, J. (2008). Una regla óptima para Colombia, 1991-2006. Lecturas de Economía. 69, 9-39. https://doi.org/10.17533/udea.le.n69a731
Ross, S., Westerfield, R., & Jaffe, J. (2018). Finanzas Corporativas. Décimo primera edición. McGraw-Hill.
Smith, R., & Taylor, R. (1999). Likelihood Ratio Tests for Seasonal Unit Roots. Journal of Time Series Analysis 20(4), 453-476. https://doi.org/10.1111/1467-9892.00149
Taylor, R. (1998). Testing for Unit Roots in Monthly Time Series. Journal of Time Series Analysis, 19(3), 349-368. https://doi.org/10.1111/1467-9892.00096
Tsay, R. (2010). Analysis of financial time series. Tercera edición. Wiley.
Vargas, H., Hamann, F., & González, A. (2010). Efectos de la política monetaria sobre las tasas de interés de los créditos hipotecarios en Colombia. Borradores de Economía. 592. https://www.banrep.gov.co/es/borrador-592
Vera, M., Barreto, M., & Romero, L. (2015). Determinantes de la demanda de crédito de consumo en Colombia, 2010-2014. Revista Pre-til, 33, 55-76. http://repository.unipiloto.edu.co/handle/20.500.12277/8023
Wassell, C., & Saunders, P. (2008). Time Series Evidence on Social Security and Private Savings: The issue Revisited [working paper]. https://www.semanticscholar.org/paper/TIME-SERIES-EVIDENCE-ON-SOCIAL-SECURITY-AND-PRIVATE-Saunders/f83af410a13139f7007e681ee816e6125ac478c8
Wee, C., & Tan, R. (1997). Performance of Johansen’s Cointegration Test. East Asian Economic Issues, 3(3), 402-414. https://doi.org/10.1142/9789812819376_0029
Zhou, S. (2001). The Power of Cointegration Test versus Data Frequency and Time Spans. Southern Economic Journal, 67 (4), 906-921. https://doi.org/10.2307/1061577
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Elmer Sánchez-Dávila, Erik Muñoz Henríquez, Francisco Gálvez Gamboa
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
This page, by Universidad de Antioquia, is licensed under a Creative Commons Attribution License.
Authors who publish with this journal agree to retain copyright and grant the journal right of first publication, with the article licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License allowing others to share it as long as they acknowledge its authorship and original publication in this journal.
Authors can enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), provided that these arrangements be not for profit and the journal be acknowledged as the original source of publication.
Authors are permitted and encouraged to post their papers online (e.g., in institutional repositories or on their websites), as it can lead to valuable exchanges as well as greater citation of the published work.
