Description

There is a vast literature that studies the flexibility of bank interest rates in different countries. In this paper we show some evidence for the Chilean banking industry, concluding that there is some sluggishness of adjustment of the bank-lending rates to changes in policy rate. However, Chile is among the countries that have more flexible interest rate. On the basis of individual bank data and a theoretical model we identified bank characteristics that might affect the degree of stickiness. Stylized facts and estimation results suggest that banks with smaller portion of past-due loans and higher percentage of household adjust faster to policy rate movements.