INVESTIGATION OF THE DETERMINANTS OF THE ADJUSTMENT OF LENDING RATES IN MACEDONIA – A SUR APPROACH

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By: Jane BOGOEV
JEL: C22, E43, E52, G21
Keywords: Interest Rate Pas-through, Monetary Policy, Banks’ Financial Characteristics, Banks’ Heterogeneous Behaviour, Aggregation Bias

This paper empirically examines the determinants and differences of the short-run lending rate stickiness among banks in Macedonia by using the Seemingly Unrelated Regression model (SUR). For that purpose are considered up to eight bank balance sheet items, two macroeconomic variables and an indicator for the level of concentration in the banking system. The results generally support the hypothesis of aggregation bias in the literature. Namely, the size of the short-run pass-through adjustment of lending rates to changes in the “cost of funds” rate is incomplete and heterogeneous among Macedonian banks where various bank balance sheet items play different role over banks’ lending rate setting decisions.