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Did Commercial Banks Follow The Policy of The Central Bank? Evidence From Selected EU Countries

Year 2021, Volume: 5 Issue: 2, 90 - 98, 31.12.2021

Metin Tetik Ayşegül Özkan

https://doi.org/10.30711/utead.1052236

Abstract

This study is based on examining the interaction between the interest rates set by commercial banks and the central bank policy rate. In this framework, it is analyzed whether bank interest rates follow the policy decisions of central banks for selected European countries (Bulgaria, Czechia, Denmark, Hungary, Romania, and Turkey). The research hypotheses put forward were tested using the Toda-Yamamoto approach for the periods 2010M01-2021M08. It showed a reciprocal causality between deposit rates and policy rates in Bulgaria, Romania, and Turkey. However, for Czechia, Denmark, and Hungary, the causality direction was only from the policy rate to the deposit rate. Our hypothesis that banks follow the policy rate is valid for the Czech Republic, Denmark, and Hungary. However, since the causality is bidirectional in Bulgaria, Romania, and Turkey, we couldn't conclude that banks follow the policy rate.

Keywords

Policy rate interest rates central banks banks causality

References

  • Aristei, D., Gallo, M., (2014). Interest rate pass-through in the euro area during the financial crisis: a multivariate regime-switching approach. Journal of Policy Modelling, 36, 273-295.
  • Binici, M., Erol, H., Kara, H., Özlü, P., Ünalmış, D., (2013). Faiz koridoru bir makro ihtiyati araç olabilir mi? TCMB Ekonomi Notları, 20, 1-16.
  • Borio, C.E.V., Fritz, W., (1995). The response of short-term bank lending rates to policy rates: a cross-country perspective. BIS Working Paper, No. 27.
  • Castro, V., (2011). The impact of the european union fiscal rules on economic growth. Journal of Macroeconomics, 33(2), 313-326.
  • Cottarelli, C., Kourelis, A., (1994). Financial structure, bank lending rates and the transmission mechanism of monetary policy. IMF Staff Papers, 41(4), 587–623.
  • De Bondt, G., (2002). Retail bank interest rate pass-through: new evidence at the euro area level. ECB Working Papers, No. 136. Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: journal of the Econometric Society, 1057-1072.
  • Engle, R.F., Granger, C.W., (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 55(2), 251-276.
  • Granger, C.W., (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 37(3), 424-438.
  • Güler, A., (2021). Politika faizlerinin banka faizlerine geçişkenliği: Türkiye örneği. EKEV Akademi Dergisi, 25(85), 15-38.
  • Holton, S., Rodriguez d’Acri, C., (2018). Interest rate pass-through since the euro area crisis. Journal of Banking and Finance, 96, 277-291.
  • İnal, G.D., (2006). Türkiye’de para politikası faiz kararlarının uzun dönemli faizler üzerindeki etkisi. Uzmanlık Yeterlilik Tezi, Türkiye Cumhuriyeti Merkez Bankası Dış İlişkiler Genel Müdürlüğü, Ankara.
  • Karagiannis, S., Panagopoulos, Y., Vlamis, P., (2010). Interest rate pass-through in the Eurozone and the USA: implications for monetary policy in the context of the recent financial crisis. Journal of Policy Modelling, 32, 323-338.
  • Kwiatkowski, D., Phillips, P.C., Schmidt, P., Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root?. Journal of Econometrics, 54(1), 159-178.
  • Martin, C., Milas, C., (2013). Financial crises and monetary policy: Evidence from the UK. Journal of Financial Stability, 9(4), 654-661.
  • Mojon, B., (2000). Financial structure and the interest rate channel of ECB monetary policy, ECB Working Paper, No. 40.
  • Nelson, C. R., & Plosser, C. R. (1982). Trends and random walks in macroeconmic time series: some evidence and implications. Journal of monetary economics, 10(2), 139-162.
  • Phillips, P.C., Perron, P., (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • Rambaldi, A.N., Doran, H.E., (1996). Testing for granger non-casuality in cointegrated systems made easy. Department of Econometrics, University of New England.
  • Şıklar, İ., Doğan, E., Dinç, M., (2016). Interest rate pass through in Turkey: the measurement of the monetary trassmission mechanism dynamics. Journal of Business and Economic Policy, 3(4), 38-45.
  • Tapşin, G., & Karabulut, A. T. (2013). Reel döviz kuru, ithalat ve ihracat arasındaki nedensellik ilişkisi: Türkiye örneği. Akdeniz İİ BF Dergisi,(26), 190-205.
  • Tetik, M., Kara, G., (2020). FED ve TCMB politika kararları arasındaki stratejik etkileşimin testi: Toda-Yamamoto yaklaşımı. Ekoist: Journal of Econometrics and Statistics, 32, 35-47.
  • Toda, H.Y., Phillips, P.C. (1993). Vector autoregressions and causality. Econometrica: Journal of the Econometric Society, 61(6), 1367-1393.
  • Toda, H.Y., Yamamoto, T., (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250.
  • Varga, J.Z., (2021). Effect of the financial crisis and low interest rate environment on interest rate pass-through in Czech Republic, Hungary and Romania. Acta Oeconomica, 71(4), 551-567.

Did Commercial Banks Follow The Policy of The Central Bank? Evidence From Selected EU Countries

Year 2021, Volume: 5 Issue: 2, 90 - 98, 31.12.2021

Metin Tetik Ayşegül Özkan

https://doi.org/10.30711/utead.1052236

Abstract

Bu çalışma, ticari bankaların belirlediği faiz oranları ile merkez bankası politika faizi arasındaki etkileşimin incelenmesine dayanmaktadır. Bu çerçevede seçilen Avrupa ülkeleri (Bulgaristan, Çekya, Danimarka, Macaristan, Romanya ve Türkiye) için banka faiz oranlarının ülkelere ait merkez bankalarının politika kararlarını takip edip etmediği analiz edilmektedir. Ortaya konulan araştırma hipotezleri, 2010M01-2021M08 dönemleri için Toda-Yamamoto yaklaşımı kullanılarak test edilmiştir. Bulgaristan, Romanya ve Türkiye'de mevduat faizleri ile politika faizleri arasında karşılıklı bir nedensellik olduğunu göstermiştir. Ancak Çekya, Danimarka ve Macaristan için nedensellik yönü sadece politika faizinden mevduat faizine doğrudur. Bankaların politika faizini izlediği hipotezimiz Çek Cumhuriyeti, Danimarka ve Macaristan için geçerlidir. Ancak Bulgaristan, Romanya ve Türkiye'de nedensellik çift yönlü olduğu için bankaların politika faizini izlediği sonucuna varılamamıştır.

Keywords

Politika faizi faiz oranları merkez bankaları bankalar nedensellik

References

  • Aristei, D., Gallo, M., (2014). Interest rate pass-through in the euro area during the financial crisis: a multivariate regime-switching approach. Journal of Policy Modelling, 36, 273-295.
  • Binici, M., Erol, H., Kara, H., Özlü, P., Ünalmış, D., (2013). Faiz koridoru bir makro ihtiyati araç olabilir mi? TCMB Ekonomi Notları, 20, 1-16.
  • Borio, C.E.V., Fritz, W., (1995). The response of short-term bank lending rates to policy rates: a cross-country perspective. BIS Working Paper, No. 27.
  • Castro, V., (2011). The impact of the european union fiscal rules on economic growth. Journal of Macroeconomics, 33(2), 313-326.
  • Cottarelli, C., Kourelis, A., (1994). Financial structure, bank lending rates and the transmission mechanism of monetary policy. IMF Staff Papers, 41(4), 587–623.
  • De Bondt, G., (2002). Retail bank interest rate pass-through: new evidence at the euro area level. ECB Working Papers, No. 136. Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: journal of the Econometric Society, 1057-1072.
  • Engle, R.F., Granger, C.W., (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 55(2), 251-276.
  • Granger, C.W., (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 37(3), 424-438.
  • Güler, A., (2021). Politika faizlerinin banka faizlerine geçişkenliği: Türkiye örneği. EKEV Akademi Dergisi, 25(85), 15-38.
  • Holton, S., Rodriguez d’Acri, C., (2018). Interest rate pass-through since the euro area crisis. Journal of Banking and Finance, 96, 277-291.
  • İnal, G.D., (2006). Türkiye’de para politikası faiz kararlarının uzun dönemli faizler üzerindeki etkisi. Uzmanlık Yeterlilik Tezi, Türkiye Cumhuriyeti Merkez Bankası Dış İlişkiler Genel Müdürlüğü, Ankara.
  • Karagiannis, S., Panagopoulos, Y., Vlamis, P., (2010). Interest rate pass-through in the Eurozone and the USA: implications for monetary policy in the context of the recent financial crisis. Journal of Policy Modelling, 32, 323-338.
  • Kwiatkowski, D., Phillips, P.C., Schmidt, P., Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root?. Journal of Econometrics, 54(1), 159-178.
  • Martin, C., Milas, C., (2013). Financial crises and monetary policy: Evidence from the UK. Journal of Financial Stability, 9(4), 654-661.
  • Mojon, B., (2000). Financial structure and the interest rate channel of ECB monetary policy, ECB Working Paper, No. 40.
  • Nelson, C. R., & Plosser, C. R. (1982). Trends and random walks in macroeconmic time series: some evidence and implications. Journal of monetary economics, 10(2), 139-162.
  • Phillips, P.C., Perron, P., (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • Rambaldi, A.N., Doran, H.E., (1996). Testing for granger non-casuality in cointegrated systems made easy. Department of Econometrics, University of New England.
  • Şıklar, İ., Doğan, E., Dinç, M., (2016). Interest rate pass through in Turkey: the measurement of the monetary trassmission mechanism dynamics. Journal of Business and Economic Policy, 3(4), 38-45.
  • Tapşin, G., & Karabulut, A. T. (2013). Reel döviz kuru, ithalat ve ihracat arasındaki nedensellik ilişkisi: Türkiye örneği. Akdeniz İİ BF Dergisi,(26), 190-205.
  • Tetik, M., Kara, G., (2020). FED ve TCMB politika kararları arasındaki stratejik etkileşimin testi: Toda-Yamamoto yaklaşımı. Ekoist: Journal of Econometrics and Statistics, 32, 35-47.
  • Toda, H.Y., Phillips, P.C. (1993). Vector autoregressions and causality. Econometrica: Journal of the Econometric Society, 61(6), 1367-1393.
  • Toda, H.Y., Yamamoto, T., (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250.
  • Varga, J.Z., (2021). Effect of the financial crisis and low interest rate environment on interest rate pass-through in Czech Republic, Hungary and Romania. Acta Oeconomica, 71(4), 551-567.
There are 24 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Metin Tetik 0000-0003-2741-7175

Ayşegül Özkan 0000-0002-5748-1058

Publication Date December 31, 2021
Published in Issue Year 2021 Volume: 5 Issue: 2

Cite

APA Tetik, M., & Özkan, A. (2021). Did Commercial Banks Follow The Policy of The Central Bank? Evidence From Selected EU Countries. Uluslararası Ticaret Ve Ekonomi Araştırmaları Dergisi, 5(2), 90-98. https://doi.org/10.30711/utead.1052236
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