Banks and other credit institutions are key players in the transmission of monetary policy, especially when the responses of deposit and loan interest rates to shifts in policy rates are among the most important channels. This pass-through depends on the conditions prevailing in the loan and deposit markets, which are, in turn, affected by macroeconomic factors. Hence, when setting their policy, monetary authorities must take into account those conditions and the behavior of banks. This paper shows this point using a micro-banking model and presents supporting empirical evidence based on monthly data for Colombia between 1999 and 2006.
We study the relationship between US and Colombian sovereign debt interest rates between 2004 and 2013. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a moving window linear regression to examine the link between sovereign bond yields. Second, we estimate a VARX-MGARCH model to compute the short-term response of local asset prices to foreign financial shocks. Our exercises consider data with daily frequency. The analysis is performed on three sample periods (i.e., before, during, and after the global financial crisis). Our findings show that the link between sovereign bond yields has changed over time. Moreover, the short-run responses of local asset prices to foreign financial shocks have been qualitatively different in the three periods. The especial role of US Treasuries as a "safe haven asset" during highly volatile time spans seems to be at the root of these changes.
This article presents a quantitative analysis of the impact central bank monetary policy on interest rates of mortgage loans, both long and short term. First, the econometric results confirm the existence of a cointegrating relationship, as found before by Galindo and Hofstetter (2008) between the interest rate mortgage loans (tich) and yields central bank public debt securities (tes). Unlike this study, we conclude that in the long term the relationship between the two rates is one to one. Therefore, both monetary policy (through a low and credible inflation target) and fiscal policy (through greater fiscal solvency) can help reduce long-term tich. Second, in the short term an innovation central bank 100 basis points to interest rate policy of the central bank is transmitted to the spread tich-tes with a lag of six to ten months and has a maximum of 50 -60 bp, after controlling for its effects on other macroeconomic variables.
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