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Does the interest rate for business loans respond asymmetrically to changes in the cash rate? created by Abbas Valadkhani, ,Amir Arjomandi and Martin O'Brien

By: Contributor(s): Material type: TextTextSeries: Applied economics letters ; Volume 20, number 9New York: Taylor and Francis, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 13504851
Subject(s): LOC classification:
  • HB1.A666 APP
Online resources: Abstract: This article examines the dynamic relationship between the Reserve Bank of Australia's (RBA's) cash rate and the variable interest rate for lending to small businesses. The relationship is evaluated via an asymmetric GARCH model using monthly data spanning from August 1990 to October 2012. Our results show that a 1 percentage point increase in the cash rate results in an instantaneous 1.086 percentage point rise in the variable rate for small businesses, whereas an equivalent 1 percentage point cut only leads to a 0.862 percentage point fall with a delay of up to 2 months. This outcome has obvious implications for the RBA's monetary policy transmission mechanism and the effectiveness of the expansionary policy versus contractionary policy.
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Holdings
Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB1.A666 APP (Browse shelf(Opens below)) Vol. 20, no 9 (pages 869-874) SP17975 Not for loan For In House Use Only

This article examines the dynamic relationship between the Reserve Bank of Australia's (RBA's) cash rate and the variable interest rate for lending to small businesses. The relationship is evaluated via an asymmetric GARCH model using monthly data spanning from August 1990 to October 2012. Our results show that a 1 percentage point increase in the cash rate results in an instantaneous 1.086 percentage point rise in the variable rate for small businesses, whereas an equivalent 1 percentage point cut only leads to a 0.862 percentage point fall with a delay of up to 2 months. This outcome has obvious implications for the RBA's monetary policy transmission mechanism and the effectiveness of the expansionary policy versus contractionary policy.

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