Expected and Unexpected Impulses of Monetary Policy on the |
Kuan-Min Wang |
This paper examines the impact of expected and unexpected impulses of monetary policy on the interest pass-through mechanism in nine Asian countries and the United States. It also investigates the asymmetry and rigidity of the pass-though process. The EC-EGARCH-M model is created for analyzing and examining the dynamic adjustment of interest rate and it comprises numerous factors such as the major explanatory power of the error correction term over the conditional mean of cointegration series, impulse of expected and unexpected monetary policy, asymmetric error correction term, asymmetric volatility, structural breaks, and interest risk. The empirical results indicate that, first; the asymmetric cointegration relation exists in the deposit rate of four countries and the lending rate of six countries. Second, a majority of the impacts of expected and unexpected monetary policy are positive, and the effect of unexpected monetary impulse are larger that expected ones. Third, the impacts of hetero-risk of interest rate are significant in certain countries, and the leverage effect exists in six countries. Fourth, most countries have downward rigid adjustments in retail interest rate. |
Key Words: Monetary policy expectation; Interest rate pass-through; Asymmetric threshold cointegration; EC-EGARCH-M model. |
JEL Classification Numbers: C32, C50, E43, E52. |