Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate

A Valadkhani; Sajid Anwar

doi:10.1111/j.1475-4932.2012.00823.x

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Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate

Journal article

Open access

Peer reviewed

Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate

A Valadkhani and Sajid Anwar

Economic Record, Vol.88(282), pp.341-350

2012

DOI: https://doi.org/10.1111/j.1475-4932.2012.00823.x

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Abstract

interest rate

mortgage rate

cash rate

There is an ongoing controversy over whether banks' mortgage rates rise more rapidly than they fall due to their asymmetric responses to changes in the cash rate. This paper examines the dynamic interplay between the cash rate and the standard-variable mortgage rate using monthly data in the post-1989 era. Unlike previous Australian studies, our proposed threshold and asymmetric error-correction models account for both the amount and adjustment asymmetries. We found that the Reserve Bank of Australia's rate rises have a much larger and more instantaneous impact on the mortgage rate than rate cuts.

Details

Title: Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate
Authors: A Valadkhani (Author) - University of Wollongong
Sajid Anwar (Author) - University of the Sunshine Coast - Faculty of Arts and Business
Publication details: Economic Record, Vol.88(282), pp.341-350
Publisher: Wiley-Blackwell Publishing Asia
Date published: 2012
DOI: 10.1111/j.1475-4932.2012.00823.x
ISSN: 0013-0249
Copyright note: Copyright © 2002 Wiley-Blackwell Publishing Asia. This is the accepted version of the following article: Valadkhani, A, Anwar, S, Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate. THE ECONOMIC RECORD, VOL. 88, NO. 282, SEPTEMBER, 2012, 341-350, which has been published in final form at DOI:10.1111/j.1475-4932.2012.00823.x.
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: 99450387802621
Output Type: Journal article

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