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Lending rate stickiness and monetary transmission mechanism: the case of Canada and the United States

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  • Bakhtiar Moazzami

Abstract

This paper examines the short-run and long-run impacts of changes in money market rates on lending rates in Canada and the US. This is done using an error-correction modelling framework, which distinguishes short-term impacts from long-run or full equilibrium effects. It is found that lending rates in the US have been stickier than those in Canada. However, the US lending rate rigidity, measured by the impact multiplier, has decreased in recent years. In contrast, Canada's lending rate has become stickier during the 1990s. The differences in adjustment speed between the two countries are attributed to the structure of their financial systems.

Suggested Citation

  • Bakhtiar Moazzami, 1999. "Lending rate stickiness and monetary transmission mechanism: the case of Canada and the United States," Applied Financial Economics, Taylor & Francis Journals, vol. 9(6), pages 533-538.
    • Handle: RePEc:taf:apfiec:v:9:y:1999:i:6:p:533-538
    DOI: 10.1080/096031099331989
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    References listed on IDEAS

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    1. Allen N. Berger & Timothy H. Hannan, 1989. "Price rigidity and market structure: theory and evidence from the banking industry," Finance and Economics Discussion Series 59, Board of Governors of the Federal Reserve System (U.S.).
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    3. Daniel L. Thornton, 1994. "Financial innovation, deregulation and the \\"credit view\\" of monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 31-49.
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