Interest Rates Pass-Through: Evidence from Noncausal Process Models

This research is devoted to studying the process of interest rates pass-through in Russia using non-causal autoregressive models. The paper provides an overview of interest rates pass-through theoretical models, as well as the results of empirical studies performed using current data on credit and deposit rates. The possibility of applying non-indicative models of time series in applied macroeconomic analysis, and, in particular, in the study of portable interest rates, was demonstrated. Using non-causal autoregression models to study interest rate pass-through allows to establish and identify the properties of non-fundamentalness in the pricing process: bank rates tend to be adjusted in response to the expected change in money market rates and bond yield. It provides an empirical justification of M. Woodford’s suggestion about anticipating future rate changes by banks, and also provides empirical evidence of rational expectation models in the description of bank pricing. These results can be used in developing Bank of Russia monetary policy and in macroeconomic modeling of the Russian business cycle and financial market.