Asymmetric interest rate transmission in an inflation-targeting framework: The case of Colombia

Galindo, Arturo; Steiner, Roberto

doi:10.1016/j.latcb.2022.100069

Cited by 7 publications

(8 citation statements)

References 27 publications

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“…The Symmetric and Asymmetric Nexus … 38 been utilized in many studies to estimate asymmetries within a single framework. These studies have found long-run asymmetric interest rate pass-through, providing policymakers with clear evidence of the expected effects of monetary actions based on the direction of interest rate changes (Galindo & Steiner, 2022).…”

Section: Literature Reviewmentioning

confidence: 96%

“…Numerous studies have attempted to examine the relationship between these variables and the overall economy and Inflation by measuring the direct linear effects (symmetric). However, only a few studies have explored the nonlinear (asymmetric) effects (Apergis & Cooray, 2015) (Galindo & Steiner, 2022). This study aims to investigate the nonlinear and asymmetric relationship of Jordanian monetary policy compared to its linear effects.…”

Section: ‫في‬ ‫ي‬ ‫األساس‬ ‫والتضخم‬ ‫النقدية‬ ‫السياسة‬ ‫فائدة‬ ‫أسع...mentioning

confidence: 99%

“…This process occurs when nominal prices adjust slowly due to costly or staggered price settings. Investors exploit differences in risk-adjusted expected returns on debt instruments of different maturities, as explained by the expectations hypothesis of the term structure (Galindo & Steiner, 2022). As a result, investors adjust their investment expenditures, reducing borrowing due to increased real costs over all horizons.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, studies have identified differences in the pass-through and adjustment speed of inflation to changes in monetary policy rates depending on the direction of the policy rate adjustment (De Bondt, 2005). They found that the adjustment of monetary policy rates is slower in response to a decrease in money market rates than an increase (Galindo & Steiner, 2022). This phenomenon can be attributed to reduced interest elasticity during economic downturns, resulting in upward interest rate rigidity (Gregor & Melecký, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

“…These studies found a significant relationship between monetary policy and inflation. In the context of interest rate pass-through, (Galindo & Steiner, 2022), (Apergis & Cooray, 2015), and (MacDonald et al, 2011) utilized asymmetric methodologies (NARDL) to investigate the effects of changes in policy rates on lending rates, particularly consumer and ordinary corporate loans. Their findings suggested that lending rates were rigidly rising, with large retail lending rates responding more to policy rate decreases than hikes.…”

Section: Empirical Studiesmentioning

confidence: 99%

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The Symmetric and Asymmetric Nexus Between Monetary Policy Interest Rate and Core Inflation in Jordan

Al-Majali,

Al-Shamaileh

2024

jjes

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Objectives: This study investigates monetary policy's symmetric and asymmetric impacts on core inflation in Jordan. It employs linear and nonlinear autoregressive distributed lag (NARDL) models. The research also seeks to assess the relationship between the overnight deposit rate, money supply growth, and real GDP growth on core inflation and to explore potential linear or nonlinear effects. Methods: The study applies ARDL and NARDL models to estimate the relationships above. It utilizes data from the first quarter of 1998 to the first quarter of 2023. Tests for Granger causality are conducted, and the Brock-Dechert-Scheinkman (BDS) test is employed to ascertain the presence of nonlinear paths within the study variable. Robustness checks are conducted to ensure parameter stability. Results: The analysis provides compelling empirical evidence supporting a long-term relationship between the overnight deposit rate and core inflation. The Brock-Dechert-Scheinkman (BDS) test confirms the existence of nonlinear dynamics. The ARDL model reveals a linear relationship: a 1% interest rate increase leads to a 0.26% reduction in core inflation in the long run. In contrast, the Nonlinear Autoregressive Distributed Lag (NARDL) analysis unveils an asymmetric effect: a 1% increase in the overnight deposit rate decreases core inflation by 0.43%, while a 1% reduction increases it by 0.37%. Conclusions: These findings have critical implications for monetary policymakers. They underscore the importance of judiciously considering interest rate adjustments to manage inflation dynamics, acknowledging the nonlinear and asymmetric effects inherent in the relationship between the overnight deposit rate and core inflation. When crafting monetary policy strategies, policymakers must consider these nuanced dynamics to address inflation concerns effectively.

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Section: Literature Reviewmentioning

confidence: 96%

Section: ‫في‬ ‫ي‬ ‫األساس‬ ‫والتضخم‬ ‫النقدية‬ ‫السياسة‬ ‫فائدة‬ ‫أسع...mentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%