On The Dynamics Of Lending And Deposit Interest Rates In Emerging Markets: A Non-Linear Approach

Ana María Iregui, Estudios Económicos Banco de la República
Costas Milas, Brunel University
Jesus Otero, Universidad del Rosario

Abstract

This paper studies the dynamics of lending and deposit rates in two emerging markets in Latin America: Colombia and Mexico. The dynamics of lending (deposit) interest rates are driven by the exogenous interbank interest rate and deviations from the long-run lending-interbank (deposit-interbank) interest rate relationship. Allowing for different interest rate behavior during periods characterized by large and small values of the spread, the non-linear specification proves superior to the linear one.

Recommended Citation

Ana María Iregui, Costas Milas, and Jesus Otero (2002) "On The Dynamics Of Lending And Deposit Interest Rates In Emerging Markets: A Non-Linear Approach", Studies in Nonlinear Dynamics & Econometrics: Vol. 6: No. 3, Article 4.
http://www.bepress.com/snde/vol6/iss3/art4

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