On the empirical evidence of asymmetric effects in the Polish interest rate pass-through

Abstract

The paper empirically examines the potential asymmetries in the interest rate pass-through in Poland. We investigate the chosen retail interest rates in commercial banks on deposits and loans denominated in the Polish currency. It is considered whether their adjustment to changes in interbank rates is asymmetric in the long term as well as in the short term. We test for asymmetric cointegration using threshold autoregressive models and momentum-threshold autoregressive models. Next, if it is possible applying the threshold error correction models, we search for asymmetries associated with the following factors: the direction of change in the money market rate, the level of the economic activity, the level of liquidity, the level of central bank's credibility, the level of expectations, and the level of competition. Finally, we test whether using the asymmetric models improves the quality of forecasts of retail bank interest rates.