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INTEREST RATE PASS-THROUGH: THE CASE OF JORDAN

Osama D. Sweiden

Sažetak

The paper seeks to explore empirically the long-run relationship between short-term policy interest
rate and deposit and lending rates in Jordan. Technically, we examine the speed of adjustment and
pass-through from policy rate to deposit and lending rates. The empirical evidence of the Jordanian
economy shows deposit and lending rates adjust primarily in response to the previous period’s
departure from the long-run equilibrium. Further, retail interest rates follow a symmetric movement
for their deviations from the long-run equilibrium. Accordingly, the CBJ has the power to control the
spread between deposit and lending rates. Furthermore, deposit rate adjusts larger and faster than
lending rate for a deviation from the long-run equilibrium. As a result, Jordan’s monetary policy
action needs approximately 11 quarters to be effective.

Ključne riječi

Monetary policy; Central bank; Symmetric adjustment; Interest rate pass-through; Error correction model

Hrčak ID:

67735

URI

https://hrcak.srce.hr/67735

Datum izdavanja:

1.3.2011.

Podaci na drugim jezicima: hrvatski

Posjeta: 1.949 *