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  • International funding cost and heterogeneous mortgage interest-rate pass-through: a bank-level analysis

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    PhamPUB159.pdf (703.6Kb)
    Author(s)
    Holland, Quynh Chau Pham
    Liu, Benjamin
    Roca, Eduardo
    Griffith University Author(s)
    Roca, Eduardo D.
    Liu, Benjamin
    Holland, Quynh Chau
    Year published
    2019
    Metadata
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    Abstract
    This study examines the transmission of the cost-of-funds rates, domestically and internationally, to owner-occupied housing interest rates at the bank level for the period 2002(7)–2015(12) in Australia. Three main issues, cross-sectional dependence, parameter heterogeneity, and asymmetry, have been considered using the linear and nonlinear common-factor Augmented Mean Group estimators. Significant unobservable coefficients in all estimates ascertain that unobserved common factors arising from both national and global shocks have a significant influence on mortgage rate transmission. The results of sizable heterogeneity and ...
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    This study examines the transmission of the cost-of-funds rates, domestically and internationally, to owner-occupied housing interest rates at the bank level for the period 2002(7)–2015(12) in Australia. Three main issues, cross-sectional dependence, parameter heterogeneity, and asymmetry, have been considered using the linear and nonlinear common-factor Augmented Mean Group estimators. Significant unobservable coefficients in all estimates ascertain that unobserved common factors arising from both national and global shocks have a significant influence on mortgage rate transmission. The results of sizable heterogeneity and asymmetry, found in all estimates while controlling for cross-sectional correlations, highlight the substantial effect of the foreign-funds rate on long-run mortgage price setting. We find a closer connection between mortgage interest rates and international funding cost; we have also confirmed a declining transmission of the policy rate after the 2008 global financial crisis.
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    Journal Title
    Empirical Economics
    DOI
    https://doi.org/10.1007/s00181-018-1488-6
    Copyright Statement
    © 2018 Springer Berlin Heidelberg. This is an electronic version of an article published in Empirical Economics, 2018. Empirical Economics is available online at: http://link.springer.com/ with the open https://doi.org/10.1007/s00181-018-1488-6 of your article.
    Subject
    Economics
    Other economics not elsewhere classified
    Asymmetry
    Heterogeneity
    Cross-sectional dependence
    Interest rate pass-through
    Bank mortgages
    AMG models
    Publication URI
    http://hdl.handle.net/10072/381730
    Collection
    • Journal articles

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