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List of Papers for this Meeting
44th Annual Meeting
Bangko Sentral ng Pilipinas Assembly Hall
November 21 - 22 2006
Theme: Growth, Development, and Institutions
Paper Details
| Panel: |
Session 1: Monetary Policy (1) |
| Title: |
Paper 2: The Impact of BSP Policy Interest Rates on Market Interest Rates |
| JEL Code(s): |
E5 |
| Abstract: |
This article addresses the issue of the role and relevance of the BSP policy rate in financial markets, given the observed divergence of RRP and the 91-day Treasury bill rates. Econometric results show that the BSP retains its capability to influence market interest rates through adjustment of the policy rate. Apart from the past trend in the T-bill rate itself, the policy rate is the most significant determinant of the T-bill rate over the very near term (within three months). Beyond this period, exchange rate changes begin to dominate the policy rate in influence on the T-bill rate. Meanwhile, the pass-through from the policy rate to the T-bill rate remains limited. Moreover, causality tests indicate that the channel of impact may also be indirect, through secondary market rates.
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