Lending rate sensitivity to monetary policy: a bank level empirical analysis

Purpose This paper evaluates how the monetary policy rate influences bank lending rates in Peru, focusing on various loan types from September 2010 to August 2022. Design/methodology/approach We utilize the Bai and Perron (1998, 2003) methodology to account for structural changes in the pass-through effect of monetary policy on lending rates. Findings Findings indicate a heterogeneous impact of monetary policy on lending rates, with larger effects during significant rate changes and heightened sensitivity post-2019 due to COVID-19. Originality/value This study is the first to investigate the effects of monetary policy on interest rates using segment and bank level data in Peru.