Asymmetries in responses of commercial banks in a transitional economy to countercyclical monetary policy: The case of Romania

Authors

  • Chu V. Nguyen Davies College of Business University of Houston-Downtown
  • Phan D. Khoi College of Economics Can Tho University
  • Huynh V. Khai College of Economics Can Tho University

DOI:

https://doi.org/10.15549/jeecar.v5i1.192

Keywords:

Asymmetry, countercyclical monetary policy, commercial banks’ lending rate, Central Bank’s discount rate, commercial banks’ lending-Central Bank’s discount rate spread, time lag, Romania

Abstract

The empirical results of this study reveal the following interesting characteristics of the Romanian banking sector over the December 1993 through August 2017 period. First, the spread between the lending-Central Bank’s discount rates was stable and adjusted to its long-run threshold asymmetrically. Second, lending institutions respond faster to contractionary than expansionary countercyclical monetary policy actions. This empirical finding suggests that Romanian commercial banks exhibit predatory rate setting behavior, which is consistent with those of their counterparts in advanced and emerging economies. Third, lending institutions respond to countercyclical monetary policy and the Romanian Central Bank authority effectively utilizes monetary policy to manage the economy as evidenced by the short-run dynamic and long-run Granger-causality from the discount rate to the banks’ lending rate. With respect to the time lags of the Romanian monetary policy found within the banking sector, the empirical results suggest that it takes almost two years for the lending rate to adjust to a monetary policy action completely.

Author Biographies

Chu V. Nguyen, Davies College of Business University of Houston-Downtown

Dr. Chu V. Nguyen is an Associate Professor of Economics and Finance and Chair of the FAEIS Department at the Marilyn Davies College of Business, University of Houston-Downtown. He earned an MA in Economics, an MS in Mathematics and a PhD in Economics from the University of Cincinnati. He is also the Chairman of the Board of Directors of Tropical Star Enterprise, Inc.  He once served as an economist and then the Head of the Economic Analysis and Forecasting Department at the 5th District of Federal Home Loan Bank System. He published over 85 publications in reputable US and international peer-reviewed journals.

Phan D. Khoi, College of Economics Can Tho University

Dr. Phan Dinh Khoi is an Assistant Professor of Finance and Chair of the Department of Finance and Banking at the College of Economics, Can Tho University, Vietnam. He earned a PhD degree in Finance from Lincoln University in New Zealand. He has published in international peer-reviewed journals including Journal of Asian Economics, Journal of the Asia-Pacific Economy, and Journal of Eastern European and Central Asian Research. His research interest focuses on development finance, development economics, corporate finance, and banking.

Huynh V. Khai, College of Economics Can Tho University

Dr. Huynh Viet Khai received a Ph.D. degree and did research as a postdoctoral fellow in Kyushu University, Japan. Currently, he is a lecturer at the College of Economics, Can Tho University, Vietnam. His research involves productive efficiency of agricultural production, water pollution, the demand of agricultural insurance, the solution of poverty reduction, organic production, biodiversity conservation, as well as economic valuation of non-market goods such as externality of agriculture and forest, waste management, environmental policy, and the applications of contingent valuation and choice modeling methods.

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Published

2018-05-01

How to Cite

Nguyen, C. V., Khoi, P. D., & Khai, H. V. (2018). Asymmetries in responses of commercial banks in a transitional economy to countercyclical monetary policy: The case of Romania. Journal of Eastern European and Central Asian Research (JEECAR), 5(1), 13. https://doi.org/10.15549/jeecar.v5i1.192

Issue

Vol. 5 No. 1 (2018): Journal of Eastern European and Central Asian Research

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