ASYMMETRIES IN RESPONSES OF COMMERCIAL BANKS TO MONETARY POLICY: THE CASE OF THAILAND

Chu V. Nguyen

Abstract


The empirical results of this study reveal the following six characteristics of the Thailand banking sector over the period 1985-2015. First, the commercial bank lending rates and the Central Bank discount rates are linearly cointegrated. Second, the lending-Central Bank discount rate spread was stable and adjusted to its long-run threshold asymmetrically. Third, lending institutions respond faster to contractionary than expansionary countercyclical monetary policy actions. Fourth, the Thailand Central Bank authority successfully utilizes monetary policy as evidenced by the short-run dynamic and long run Granger-causalities from the discount rate to the lending rate. Fifth, results suggest that it takes almost two years for the lending rate to adjust to changes in monetary policy. Sixth, Thailand monetary policy makers should intervene to bring the economy to its long-term trend more frequently and in small adjustments to minimize the conditional variance of the rates spread which, in turn, minimizes the magnitudes of the lending rate cycles.


Full Text:

PDF

Refbacks

  • There are currently no refbacks.