Interest rate pass-through in Morocco: Evidence from bank-level survey data |
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Institution: | 1. Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore, 18 Evans Road, Singapore 259364, Singapore;2. Lee Kuan Yew School of Public Policy, National University of Singapore, 469C Bukit Timah Road, Singapore 259772, Singapore |
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Abstract: | We investigate the relationship between banks’ marginal cost and retail lending rates in Morocco. The data covers the rates of new business loans for four market segments broken down by institutional sector between 2006Q2 and 2016Q4. We examine the pass-through mechanism using recently developed heterogeneous panel cointegration framework. Our findings suggest that there is a high degree of pass-through heterogeneity over bank products. The weak adjustment for short-term credit facilities and consumption loans can be explained by credit risk compensation allowing banks to reduce their exposition to systemic risks. Corporate loans are priced more competitive than household and individual entrepreneur products, suggesting that negotiation power or the competition from the borrower side matters. Overall, our results indicate that banking market contestability has improved during the last decade. |
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Keywords: | Retail lending rates Pass-through Heterogeneity Panel cointegration E43 E52 G21 |
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