Interest Rate Pass-Through in Ukraine: Estimates and Determinants
a National Bank of Ukraine, Kyiv, Ukraine
Abstract

In this study, we apply ARDL models to estimate the strength of long-run interest rate pass-through in Ukraine. We focus on the transmission of the overnight interbank interest rate to the rates on term deposits of households and loans to non-financial corporations – both in national currency. Controlling for macroeconomic indicators and bank financial variables we obtain bank-level time-varying estimates of transmission and run a set of panel regressions to analyze the determinants of pass-through strength. Besides linear estimates, we report asymmetric transmissions, which differ depending on the decrease or increase in the interbank rate, and timevarying estimates for transmission.

2529
views
45
downloads
Full Text
Citation
Cite as: Shapovalenko, N., Vdovychenko, A. (2023). Interest Rate Pass-Through in Ukraine: Estimates and Determinants. Visnyk of the National Bank of Ukraine, 255, 22-70. https://doi.org/10.26531/vnbu2023.255.02
Citation Format

Metrics
References

Apergis, N., Cooray, A. (2015). Asymmetric interest rate pass-through in the U.S., the U.K. and Australia: New evidence from selected individual banks. Journal of Macroeconomics, 45(C), 155–172. https://doi.org/10.1016/j.jmacro.2015.04.010

Aristei, D., Gallo, M. (2014). Interest rate pass-through in the euro area during the financial crisis: A multivariate regime-switching approach. Journal of Policy Modeling, 36(2), 273–295. https://doi.org/10.1016/j.jpolmod.2013.12.002

De Bondt, G. (2005). Interest rate pass‐through: Empirical results for the euro area. German Economic Review, 6(1), 37–78. https://doi.org/10.1111/j.1465-6485.2005.00121.x

Deutsche Bundesbank (2019). Interest rate pass-through in the low interest rate environment. Monthly Report, April 2019, pp. 33–35.

Dieppe, A., van Roye, B., Legrand, R. (2016). The BEAR toolbox. Working Paper Series 1934. Frankfurt: European Central Bank. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1934.en.pdf

Fičura, M., Witzany, J. (2023). Determinants of non-maturing deposit pass-through rates in Eurozone countries. Politická Ekonomie, 3, 291–318. https://doi.org/10.18267/j.polek.1388

Filatov, V. (2021). A new financial stress index for Ukraine. Visnyk of the National Bank of Ukraine, 251, 37–54. https://doi.org/10.26531/vnbu2021.251.03

Gambacorta, L., Iannotti, S. (2007). Are there asymmetries in the response of bank interest rates to monetary shocks? Applied Economics, 39(19), 2503–2517. https://doi.org/10.1080/00036840600707241

Gigineishvili, N. (2011). Determinants of interest rate pass-through: Do macroeconomic conditions and financial market structure matter? IMF Working Papers, 11/176. Washington: International Monetary Fund. Retrieved from https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Determinants-of-Interest-Rate-Pass-Through-Do-Macroeconomic-Conditions-and-Financial-Market-25096 

Gregor, J., Melecky, M. (2018). The pass-through of monetary policy rate to lending rates: The role of macro-financial factors. Economic Modelling, 73(C), 71–88. https://doi.org/10.1016/j.econmod.2018.03.003

Hlazunov, A., Dadashova, P., Lukianenko, I. (2023). Interest rate pass-through in Ukraine: evidence from the bank ownership. Financial and Credit Activity Problems of Theory and Practice, 5(52), 8–24. https://doi.org/10.55643/fcaptp.5.52.2023.4135

Kourelis, A., Cottarelli, K. (1994). Financial structure, bank lending rates, and the transmission mechanism of monetary policy. IMF Working Papers, 1994/039. Washington: International Monetary Fund. https://doi.org/10.5089/9781451845761.001

Leroy, A., Lucotte, Y. (2016). Structural and cyclical determinants of bank interest-rate pass-through in the Eurozone. Comparative Economic Studies, 58(2), 196–225. https://doi.org/10.1057/ces.2016.6

Leuvensteijn, M., Kok, C., Sørensen, J., Bikker, A., van Rixtel, A. (2008). Impact of bank competition on the interest rate passthrough in the euro area. ECB Working Paper, 885. Frankfurt: European Central Bank. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp885.pdf

Ma, J., Wang, H. L. (2014). Theoretical models for policy rate transmission mechanism. People’s Bank of China Working Paper, 2014/1.

Månsson, K., Shukur, G., Sjölander, P. (2013). Asymmetric quantile analysis of the Swedish mortgage price discovery process. Applied Economics, 45(21), 3088–3101. https://doi.org/10.1080/00036846.2012.681030

Mishra, P., Montiel, P. (2013). How effective is monetary transmission in low-income countries? A survey of the empirical evidence. Economic Systems, 37(2), 187–216. https://doi.org/10.1016/j.ecosys.2012.12.001

Reinhart, C., Rogoff, K. (2004). The modern history of exchange rate arrangements: A reinterpretation. The Quarterly Journal of Economics, 119, 1, 1–48. https://doi.org/10.1162/003355304772839515

Saborowski, C., Weber, M. S. (2013). Assessing the determinants of interest rate transmission through conditional impulse response functions, IMF Working Papers, 13/23. Washington: International Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/wp/2013/wp1323.pdf

Sander, H., Kleimeier, S. (2002). Asymmetric adjustment of commercial bank interest rates in the euro area: an empirical investigation into interest rate pass-through. Credit and Capital Markets, 35, 161–192. https://doi.org/10.3790/ccm.35.2.161

Sander, H., Kleimeier, S. (2004). Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration. Journal of International Money and Finance, 23(3), 461–492. https://doi.org/10.1016/j.jimonfin.2004.02.001

Shin, Y., Yu, B., Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework In: Sickles, R., Horrace, W. (eds) Festschrift in Honor of Peter Schmidt, 281–314. https://doi.org/10.1007/978-1-4899-8008-3_9

Stanisławska, E. (2015). Interest rate pass-through in Poland: Evidence from individual bank data. Eastern European Economics, 53(1), 3–24. https://doi.org/10.1080/00128775.2015.1033362

Sznajderska, A. (2012). On the empirical evidence of asymmetry effects in the interest rate pass-through in Poland. NBP Working Papers, 114. Warsaw: Narodowy Bank Polski. Retrieved from https://static.nbp.pl/publikacje/materialy-i-studia/114_en.pdf

Terrier, G., Valdes, R., Tovar Mora, C., Chan-Lau. J., Valdovinos. C. F., Garcia-Escribano, M., Medeiros, C., Tang, M-K., Martin, M., Walker, C. (2011). Policy instruments to lean against the wind in Latin America. IMF Working Papers, 2011/159. Washington: International Monetary Fund. Retrieved from https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp11159.ashx

Rights and Permissions
This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third party material in this article are included in the article’s Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material.
Submit Your Paper