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Incomplete Interest Rate Pass-Through and Monetary Policy in Iran
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| Abdulhamid Khosravi *1, Hussein Marzban2, Jafar Ghaderi2, Parviz Rostamzadeh2 |
1- Payam-e-noor University
2- shiraz university |
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Abstract: (825 Views) |
| The mechanism of policy rate effectiveness is that at first, banking rates (deposits and facilities) change, and then macro variables will change in response to them. Thereby, if interest rate pass-through is complete, then monetary policy effectiveness is significant, and if it is incomplete, then monetary policy effectiveness is insignificant. This study aims to analyze interest rate pass-through in Iran. Thereby, a DSGE model with a banking system is designed. In this model, patient households determine deposits, and facilities are devoted to inpatient households. Moreover, the policy rate is determined by the central bank in the interbank market. Using quarterly data on 2009-2019 period and the Bayesian method, model parameters are estimated. The results show that deposit and facility rates pass-through are incomplete. Moreover, simulation results show that in response to a one percent increase in the policy rate, deposit and facility rates increase less than one percent that shows the inefficiency of monetary policy based on policy rate in Iran. |
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Full-Text [PDF 1743 kb]
(423 Downloads)
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Type of Study: Theoretical Article |
Subject:
Monetary Policy, Central Banking, and the Supply of Money and Credit (E5)
Received: 2021/01/23 | Accepted: 2021/05/16 | Published: 2021/11/17
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