The Analysis of the Interest Rate Pass-Through in Russia

This paper examines the interest rate pass-through from domestic interbank market to retail interest rates in commercial banks on deposits and loans in Russia. The span of research covers the period after the transition to inflation targeting policy from May 2015 to December 2019. Empirical estimations were built on Error Correction Model (VECM) and Autoregressive Distributed Lag Model (ARDL), the choice of which depended on the statistical properties of time series, such as stationarity and nature of cointegration. The results from the empirical analysis, according to the DOLS, FMOLS, CCR estimates, suggest the interest rate pass-through to be generally weaker as the maturity of both loans and deposits increases. By implementing VECM model, we found that short-run correction to long-run equillibrium is getting faster with the increase of deposit maturity, however, the same could not be confirmed for loan rates. ARDL approach allowed to obtain the certain estimates for specific bank products, such as the immediate speed of adjustments, that was found to be slower for the mortgage and consumer loans with maturity longer than 3 years.