Asymmetric overnight rate pass-through to bank loan rates: A meta-analysis

Abstract

The literature offers mixed results on how bank lending rates respond to positive and negative fluctuations in the overnight interbank rate. Therefore, using data from 80 studies covering 30 years of research, this study employs meta-regression methods to investigate asymmetry in the overnight rate pass-through. The results show that the pass-through is asymmetric, with bank lending rates reacting more strongly to positive fluctuations than negative fluctuations. The results also show that the pass-through increases with trade openness and private sector credit supply but decreases with net national savings, while the degree of asymmetry increases with stock market size and trade openness but diminishes with central bank independence, net national savings, and monetary integration. Altogether, these findings reconcile the literature and offer new insights into the determinants of asymmetry and heterogeneity, underscoring the need to control for both in modeling the overnight rate pass-through.