Pass-through between policy interest and various bank interests: the case of Türkiye

In this study, the pass-through between the policy interest rate and various bank interest rates, such as those for vehicles, housing, and necessities- and aims to determine the extent to which a change in short-term interest rates affects long-term bank interest rates. While this mechanism, also called interest rate pass-through, measures the reaction of bank interest rates to changes in the policy interest rate changes, the monetary transmission mechanism also represents the first stage of the interest rate channel. A complete and high degree of pass-through between the mentioned interest rates enhances the functionality of the transfer mechanism interest channel. In this context, the cointegration relationship between the policy interest rate in Türkiye for the period 2012:07-2024:08 and deposit, consumer loan, housing, commercial loan interest rates was examined using the Fourier Autoregressive Deceleration Distributed Cointegration Test (FADL). The analysis findings demonstrate the existence of a decoupling relationship between the policy interest rate and the deposit, consumer loan vehicle and housing loan interest rates. The study also found that the deposit interest rate has the highest interest rate pass-through and transition level, while the consumer loan interest rate exhibits the lowest degree of pass-through.