The determinants of China's lending rates and interest rates pass-through: A cointegration analysis

摘要

Based on quarterly data between Q4, 2008-Q4, 2017, this study examines the interest rates pass-through from policy rate to lending rates, and more broadly, the determinants of lending rates in China. The results show that while there is a certain level of pass-through from money market rates to lending rates, and the interest rates pass-through has improved after the interest rate liberalization completion on October 2015, this pass-through is also negatively affected by the asset quality of commercial banks and shadow banking activities as well. This study also finds that the macroeconomic condition also affects the lending rates.