IDEAS home Printed from https://ideas.repec.org/a/jda/journl/vol.50year2016issue5pp277-294.html
   My bibliography  Save this article

Interest rate volatility and retail interest rate pass-through in the case of the Malaysian economy

Author

Listed:
  • Mohammed Nur Hussain
  • Bodrun Nahar

    (Swinburne University of Technology, Malaysia
    Selkirk College, Canada; Swinburne University of Technology, Malaysia)

Abstract

The purpose of this study is to explore the interest rate pass-through mechanism among three interest rates (discount rate, deposit rate and lending rate) in the Malaysian economy by conducting the asymmetric threshold autoregression (TAR) and momentum threshold autoregressive (MTAR) techniques and EC-EGARCH (1,1)-M model over the period January 1990 to July 2013. Moreover, we also examine the impact of the global financial crisis of 2008-2009 on these interest rates. The existence of asymmetric threshold cointegration relationships have been found between two interest rates in TAR and MTAR models, whereas only a symmetric cointegration relationship has been found between lending and discount rate in the MTAR model. The estimation of the ECEGARCH (1,1)-M model shows that the effect of interest rates volatility (deposit rate and lending rate) on the discount rate differs in this economy. Upward rigid adjustment has been recognized in both models. In addition, leverage effect has been found visible for both models. Further, the global financial crisis of 2008-2009 does not show any significant changes in the speed and size of the pass through of different interest rates. The responses of the discount rate, to both deposit and lending shocks, are found positive, while the lending shock is found decreasing after the 6th period by using the impulse response function.

Suggested Citation

  • Mohammed Nur Hussain & Bodrun Nahar, 2016. "Interest rate volatility and retail interest rate pass-through in the case of the Malaysian economy," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(5), pages 277-294, Special I.
    • Handle: RePEc:jda:journl:vol.50:year:2016:issue5:pp:277-294
    as

    Download full text from publisher

    File URL: https://muse.jhu.edu/article/619662
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Interest rate pass-through; Interest rate volatility; Asymmetric threshold cointegration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    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:jda:journl:vol.50:year:2016:issue5:pp:277-294. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Abu N.M. Wahid (email available below). General contact details of provider: https://edirc.repec.org/data/cbtnsus.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.