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Asymmetries in responses of commercial banks in a transitional economy to countercyclical monetary policy: The case of Romania

Journal of Eastern European and Central Asian Research

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Title Asymmetries in responses of commercial banks in a transitional economy to countercyclical monetary policy: The case of Romania
 
Creator Nguyen, Chu V.; Davies College of Business
University of Houston-Downtown
Khoi, Phan D.; College of Economics
Can Tho University
Khai, Huynh V.; College of Economics
Can Tho University
 
Subject Economics
Asymmetry; countercyclical monetary policy; commercial banks’ lending rate; Central Bank’s discount rate; commercial banks’ lending-Central Bank’s discount rate spread; time lag; Romania
 
Description The empirical results of this study reveal the following interesting characteristics of the Romanian banking sector over the December 1993 through August 2017 period. First, the spread between the lending-Central Bank’s discount rates was stable and adjusted to its long-run threshold asymmetrically. Second, lending institutions respond faster to contractionary than expansionary countercyclical monetary policy actions. This empirical finding suggests that Romanian commercial banks exhibit predatory rate setting behavior, which is consistent with those of their counterparts in advanced and emerging economies. Third, lending institutions respond to countercyclical monetary policy and the Romanian Central Bank authority effectively utilizes monetary policy to manage the economy as evidenced by the short-run dynamic and long-run Granger-causality from the discount rate to the banks’ lending rate. With respect to the time lags of the Romanian monetary policy found within the banking sector, the empirical results suggest that it takes almost two years for the lending rate to adjust to a monetary policy action completely.
 
Publisher Institute of Eastern Europe and Central Asia
 
Date 2018-04-28
 
Type info:eu-repo/semantics/article
Peer-reviewed Articles
info:eu-repo/semantics/publishedVersion
 
Format application/pdf
 
Identifier http://ieeca.org/journal/index.php/JEECAR/article/view/192
10.15549/jeecar.v5i1.192
 
Source Journal of Eastern European and Central Asian Research (JEECAR); Vol 5, No 1 (2018): Journal of Eastern European and Central Asian Research; 13
 
Language eng
 
Relation http://ieeca.org/journal/index.php/JEECAR/article/view/192/pdf
 
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