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Asymmetric adjustment in the prime lending–deposit rate spread
Author(s) -
Thompson Mark A.
Publication year - 2006
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2005.12.002
Subject(s) - economics , cointegration , autoregressive model , econometrics , momentum (technical analysis) , prime (order theory) , context (archaeology) , interest rate , unit root , error correction model , monetary economics , financial economics , mathematics , geography , archaeology , combinatorics
The hypothesis that bank lending rates adjust differently to rising versus declining market rates is empirically examined. This study applies threshold autoregressive and momentum threshold autoregressive models developed by Enders & Granger [Enders, W. & Granger, C. (1998). Unit root tests and asymmetric adjustment with an example using the term structure of interest rates. Journal of Business & Economic Statistics 16 , 304–311] and Enders and Siklos [Enders, W. & Siklos, P. (2001). Cointegration and threshold adjustment. Journal of Business & Economic Statistics 19 , 166–176] to the prime lending–deposit rate spread. Within the context of these models, this paper provides evidence of asymmetric adjustment in the spread.