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

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  • 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
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    References listed on IDEAS

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    1. 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.
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    10. de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 136, European Central Bank.
    11. 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.
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    Cited by:

    1. 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.

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    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

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