Original scientific paper
Deposit Rate and Lending Rate in Jordan, Which leads Which? A Cointegration Analysis
Osama D. Sweidan
; Department of Accounting, Finance and Economics, University of Sharjah, UAE
Abstract
This study intends to investigate empirically the long-run relationship between deposit and
lending rates in Jordan by utilizing quarterly data over the period (1994-2010). Empirically,
we search to identify the dominant interest rate; either deposit rate or lending rate. To
achieve the current study goals, we employ the error correction model technique and the
asymmetric short-run dynamic model. The empirical evidence of the Jordanian economy
illustrates deposit and lending rates have a long-run relationship. Deposit rate leads lending
rate. As a result, the short-run lending rate adjustment for the deviation from the long-run
equilibrium by about 22 percent in the current period. In the long-run, lending rate adjusts
by 90 percent for a change in deposit rate.
Keywords
Monetary policy; Retail interest rate; Symmetric adjustment; Interest rate pass-through; Error correction model
Hrčak ID:
85785
URI
Publication date:
1.5.2012.
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