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Frontiers of Business Research in China

Front. Bus. Res. China    2019, Vol. 13 Issue (2) : 212-230     https://doi.org/10.1186/s11782-019-0056-z
RESEARCH
Interest rate liberalization and pass-through of monetary policy rate to bank lending rates in China
Jingya Li1, Ming-Hua Liu2()
1. Faculty of Business Administration, University of Macau, Macau, China
2. Faculty of Business Administration, University of Macau, Macau, China
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Abstract

We examine whether the effectiveness of the monetary policy rate transmission differs before and after interest rate liberalization in China using the autoregressive distributed lag (ARDL) bound test and an error correction model (ECM). The results show that after liberalization the mark-up is lower, and both the long-run and shortrun interest rate pass-through has become faster and more complete. We attribute our findings to the ongoing reforms of China’s banking system, which has improved the competitiveness of Chinese commercial banks.

Keywords Interest rate pass-through      Interest rate liberalization      China      Autoregressive distributed lag (ARDL) bound test      Error correction model (ECM)     
Issue Date: 15 July 2019
 Cite this article:   
Jingya Li,Ming-Hua Liu. Interest rate liberalization and pass-through of monetary policy rate to bank lending rates in China[J]. Front. Bus. Res. China, 2019, 13(2): 212-230.
 URL:  
http://journal.hep.com.cn/fbr/EN/10.1186/s11782-019-0056-z
http://journal.hep.com.cn/fbr/EN/Y2019/V13/I2/212
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