Level Of Pass-through Research Articles

Interest Rate Pass-Through in Türkiye: Evidence of the Monetary Policy Approach

Central banks direct banks' rates by increasing or decreasing policy rates through the interest rate channel. The effectiveness of this channel is related to the interest rate pass-through. The pass-through of interest rates indicates the impact of changes in policy rates on the retail rates of banks. Pass-through is not only a prerequisite for the monetary transmission mechanism but also is the first stage of it. A complete and quick pass-through increases the effectiveness of the interest rate channel. This paper focuses on the monetary policy approach and uses the ARDL and NARDL models to analyze the relationship between the policy rate and the lending rate in order to test the interest rate pass-through for Türkiye. To enable a comparison of the degree of pass-through and the speed of adjustment, this paper focuses on two time periods: 2011:01–2016:12 and 2017:01–2023:10. The findings of the paper indicate that there are three shreds of evidence for the interest rate pass-through in Türkiye. It is symmetric for both periods. The level of pass-through in the initial period exceeds that of the subsequent period. The rate of adjustment in the second period is faster than in the first one.

Fuel Subsidy Pass-Through and Market Structure: Evidence from the Renewable Fuel Standard

The Renewable Fuel Standard (RFS) is among the largest renewable energy mandates in the world. The policy is enforced using tradeable credits that implicitly subsidize biofuels and tax fossil fuels. The RFS relies on these taxes and subsidies to be passed through to consumers to stimulate demand for biofuels and decrease demand for gasoline and diesel. We study pass-through of the RFS subsidy for E85, a high-ethanol blend fuel, to retail fuel prices using weekly prices from over 450 fuel stations in the United States. We find that, on average, half to three-quarters of the E85 subsidy is passed through to consumers. However, pass-through takes 6–8 weeks, and station-level pass-through rates exhibit substantial heterogeneity, with the retailers’ market structure influencing both the speed and level of pass-through.