Downward stickiness of interest rates in the Australian credit card market

A Valadkhani; Sajid Anwar; Amir Arjomandi

doi:10.1080/13547860.2013.803846

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Downward stickiness of interest rates in the Australian credit card market

Journal article

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Downward stickiness of interest rates in the Australian credit card market

A Valadkhani, Sajid Anwar and Amir Arjomandi

Journal of the Asia Pacific Economy, Vol.19(1), pp.52-65

2014

DOI: https://doi.org/10.1080/13547860.2013.803846

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Abstract

credit cards

interest rates

asymmetric behaviour

This paper measures the full extent of downward stickiness in credit card interest rates by testing for the amount and adjustment asymmetries. We found that lenders behave asymmetrically in response to changes in the Reserve Bank of Australia's (RBA) cash rate. The RBA's rate rises are passed on to borrowers much faster than rate cuts and the aggregate credit card interest rate showed a very resilient degree of downward rigidity. Overall, based on the estimated short-run dynamic model, banks immediately pass on 112% of any RBA's rate rises, but only 53.7% of any rate cut. In other words, the short-run effects of rate cuts were not only less than half of the rate rises but also were delayed on average by two months. As far as changes in the credit card interest rate are concerned, an expansionary monetary policy is thus less effective than a contractionary policy.

Details

Title: Downward stickiness of interest rates in the Australian credit card market
Authors: A Valadkhani (Author) - University of New England
Sajid Anwar (Author) - University of the Sunshine Coast - Faculty of Arts and Business
Amir Arjomandi (Author) - University of Wollongong
Publication details: Journal of the Asia Pacific Economy, Vol.19(1), pp.52-65
Publisher: Routledge
Date published: 2014
DOI: 10.1080/13547860.2013.803846
ISSN: 1354-7860
Organisation Unit: School of Business and Creative Industries; Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99448942702621
Output Type: Journal article

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