The pass-through of the monetary policy rate into lending rates in Mexico
This paper estimates the pass-through of monetary policy rates into five lending rates
in Mexico using auto regressive distributed lags models (ARDLs) and taking into account
several financial market characteristics. Results show that the pass-through of monetary
policy into the average short-term lending rate is full and fast, as it takes around
3 months to be fully transmitted. However, the pass-through is heterogeneous across
credit markets, being especially weak in the mortgage and automotive credit markets.
A higher market concentration in the credit sector is associated with a higher level
of the corresponding lending rate. Other financial market characteristics, such as
the measure of bank profitability and the ratio of capital to bank assets, are also
found to affect the long-run level of one or more lending rates. Higher competition
in credit markets and reducing asymmetric information would improve the transmission
of monetary policy and contribute to reduce the level of lending rates.
Published on December 08, 2022
In series:OECD Economics Department Working Papersview more titles