IDEAS home Printed from https://ideas.repec.org/a/bkr/journl/v81y2022i2p20-48.html
   My bibliography  Save this article

Pass-Through of the Bank of Russia Key Rate into Deposit Rates Between 2020 and 2022

Author

Listed:
  • Henry Penikas

    (Bank of Russia; Lebedev Physical Institute)

Abstract

In the recent past, the Bank of Russia has both increased and decreased its policy rate: it reduced it in 2020-2021 to support the economy and raised it in 2021-2022 to tame the accelerating inflation and counter the sanctions consequences. To measure the impact of these changes on deposit rates, this paper relies on the unique monthly data on deposit rates that have been offered by Russian banks. About half of banks refrain from advertising their deposit rates on the aggregator website. To account for this missing data and the possibility of a non-Gaussian error distribution we use Heckman copula model. We identify the rouble funding component on its basis and compare it with the Bank of Russia key rate. I conclude that the pass-through in 2020–2022 is incomplete and comes with a two-month lag. I show that an upward revision of the key rate is best captured by banks that apply an internal ratings-based approach to credit risk assessment in the calculation of capital adequacy ratios.

Suggested Citation

  • Henry Penikas, 2022. "Pass-Through of the Bank of Russia Key Rate into Deposit Rates Between 2020 and 2022," Russian Journal of Money and Finance, Bank of Russia, vol. 81(2), pages 20-48, June.
    • Handle: RePEc:bkr:journl:v:81:y:2022:i:2:p:20-48
    as

    Download full text from publisher

    File URL: https://rjmf.econs.online/upload/iblock/f8e/Pass-Through-of-the-Bank-of-Russia-Key-Rate-into-Deposit-Rates-Between-2020-and-2022.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eugene Demidenko, 2016. "The p -Value You Can’t Buy," The American Statistician, Taylor & Francis Journals, vol. 70(1), pages 33-38, February.
    2. Guillaume Horny & Simone Manganelli & Benoit Mojon, 2018. "Measuring Financial Fragmentation in the Euro Area Corporate Bond Market," JRFM, MDPI, vol. 11(4), pages 1-19, October.
    3. de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 136, European Central Bank.
    4. M. N. Konyagina & I. R. Meurmishvili & A. A. Dochkina, 2020. "Evaluation of the Impact of the Bank of Russia Key Rate on the Commercial Banks’ Deposit Policy," Administrative Consulting, Russian Presidential Academy of National Economy and Public Administration. North-West Institute of Management., issue 8.
    5. Liu, Ming-Hua & Margaritis, Dimitri & Tourani-Rad, Alireza, 2008. "Monetary policy transparency and pass-through of retail interest rates," Journal of Banking & Finance, Elsevier, vol. 32(4), pages 501-511, April.
    6. Ph. Kartaev., 2017. "Is inflation targeting useful for economic growth?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 2.
    7. Mei-Yin Lin, 2015. "Deposit insurance and effectiveness of monetary policy," Applied Economics Letters, Taylor & Francis Journals, vol. 22(18), pages 1443-1449, December.
    8. Murray D. Smith, 2003. "Modelling sample selection using Archimedean copulas," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 99-123, June.
    9. David Neumark & Steven A. Sharpe, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 657-680.
    10. Fecht, Falko & Thum, Stefan & Weber, Patrick, 2019. "Fear, deposit insurance schemes, and deposit reallocation in the German banking system," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 151-165.
    11. M. Mamonov., 2017. "Hidden "holes" in the capital of not yet failed banks in Russia: An estimate of the scope of potential losses," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
    12. Takuya Hasebe, 2013. "Copula-based maximum-likelihood estimation of sample-selection models," Stata Journal, StataCorp LP, vol. 13(3), pages 547-573, September.
    13. Vadim Napalkov & Anna Novak & Andrey Shulgin, 2021. "Variations in the Effects of a Single Monetary Policy: The Case of Russian Regions," Russian Journal of Money and Finance, Bank of Russia, vol. 80(1), pages 3-45, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henry Penikas, 2023. "Smoothing the Key Rate Pass-Through: What to Keep in Mind When Interpreting Econometric Estimates," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 3-34, September.
    2. Andrey Bedin & Alexander Kulikov & Andrey Polbin, 2023. "Copula-Based Modelling of Relationship Between Dollar/Rouble Exchange Rate and Oil Prices," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 87-109, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Noura Abu Asab & Juan Carlos Cuestas, 2015. "Towards Adopting Inflation Targeting in Emerging Markets: The (A)symmetric Transmission Mechanism in Jordan," Working Papers 2015013, The University of Sheffield, Department of Economics.
    2. Conti, Gabriella & Poupakis, Stavros & Ekamper, Peter & Bijwaard, Govert E. & Lumey, L.H., 2024. "Severe prenatal shocks and adolescent health: Evidence from the Dutch Hunger Winter," Economics & Human Biology, Elsevier, vol. 53(C).
    3. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian A.R.J.M. van Rixtel, 2013. "Impact of bank competition on the interest rate pass-through in the euro area," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1359-1380, April.
    4. De Graeve, Ferre & De Jonghe, Olivier & Vennet, Rudi Vander, 2007. "Competition, transmission and bank pricing policies: Evidence from Belgian loan and deposit markets," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 259-278, January.
    5. Terence C. Cheng & Pravin K. Trivedi, 2015. "Attrition Bias in Panel Data: A Sheep in Wolf's Clothing? A Case Study Based on the Mabel Survey," Health Economics, John Wiley & Sons, Ltd., vol. 24(9), pages 1101-1117, September.
    6. Abbas Valadkhani & Sajid Anwar & Amir Arjomandi, 2014. "Downward stickiness of interest rates in the Australian credit card market," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 19(1), pages 52-65, January.
    7. Dragana Radicic & Geoffrey Pugh & Hugo Hollanders & René Wintjes & Jon Fairburn, 2016. "The impact of innovation support programs on small and medium enterprises innovation in traditional manufacturing industries: An evaluation for seven European Union regions," Environment and Planning C, , vol. 34(8), pages 1425-1452, December.
    8. Abbas Valadkhani & Sajid Anwar, 2012. "Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 341-350, September.
    9. Francesco Grigoli & José M. Mota, 2017. "Interest rate pass-through in the Dominican Republic," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 26(1), pages 1-25, December.
    10. Mahamadou Roufahi Tankari, 2020. "Rainfall variability and farm households’ food insecurity in Burkina Faso: nonfarm activities as a coping strategy," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 12(3), pages 567-578, June.
    11. Marco A. Espinosa-Vega & Alessandro Rebucci, 2004. "Retail Bank Interest Rate Pass-through: Is Chile Atypical?," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 5, pages 147-182, Central Bank of Chile.
    12. Galindo, Arturo J. & Steiner, Roberto, 2022. "Asymmetric interest rate transmission in an inflation-targeting framework: The case of Colombia," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(3).
    13. Wang, Olivier, 2020. "Banks, low interest rates, and monetary policy transmission," Working Paper Series 2492, European Central Bank.
    14. Anindya Banerjee & Victor Bystrov & Paul Mizen, 2013. "How Do Anticipated Changes to Short-Term Market Rates Influence Banks' Retail Interest Rates? Evidence from the Four Major Euro Area Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1375-1414, October.
    15. repec:zbw:bofrdp:2009_027 is not listed on IDEAS
    16. Egorov, Aleksei V. (Егоров, Алексей В.) & Borzykh, Olga A. (Борзых, Ольга А.), 2018. "Asymmetric Interest Rate Pass-Through in Russia [Асимметрия Процентного Канала Денежной Трансмиссии В России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 92-121, February.
    17. Anamaria Illes & Marco Lombardi & Paul Mizen, 2015. "Why did bank lending rates diverge from policy rates after the financial crisis?," BIS Working Papers 486, Bank for International Settlements.
    18. Ming-Hua Liu & Dimitris Margaritis & Zhuo Qiao, 2016. "The Global Financial Crisis and Retail Interest Rate Pass-Through in Australia," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-32, December.
    19. Liu, Ming-Hua & Margaritis, Dimitri & Tourani-Rad, Alireza, 2008. "Monetary policy transparency and pass-through of retail interest rates," Journal of Banking & Finance, Elsevier, vol. 32(4), pages 501-511, April.
    20. Mr. Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana: Does the Interest Rate Channel Work?," IMF Working Papers 2011/275, International Monetary Fund.
    21. Jaakko Sääskilahti, 2018. "Retail Bank Interest Margins in Low Interest Rate Environments," Journal of Financial Services Research, Springer;Western Finance Association, vol. 53(1), pages 37-68, February.

    More about this item

    Keywords

    key rate; Russia; pass-through effect; Heckman model; copula; censored samples; inflation; inflation expectations; deposit; IRB approach;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bkr:journl:v:81:y:2022:i:2:p:20-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Olga Kuvshinova (email available below). General contact details of provider: https://edirc.repec.org/data/cbrgvru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.