This study examines the pass-through from monetary policy interest rates to bank loans (including cash, corporate, house, and automobile loan rates) and deposit rates (one-, three-, and six-month term deposit rates), focusing specifically on the period when unconventional monetary policies were conducted by the Central Bank of the Republic of Turkey (CBRT). As representatives of the CBRTs monetary policy stance, the BIST Interbank Overnight Repo / Reverse repo interest rate (BIST O/N rate) and the CBRTs weighted average funding rate are considered. Gregory and Hansens (1996) cointegration test is used to analyse cointegration, whilst Bai and Perrons (1998, 2003), CUSUM, and CUSUMSQ test statistics are used to detect whether the relevant interest rates have structural breaks. Further, the DOLS estimator is used to determine the long-run coefficients. Our results clearly show that there is a cointegration relationship between monetary policy interest rates and bank loans and deposit rates, with the exception of cash and house loans. However, complete pass-through (i.e., one-to-one adjustment rates) is observed only between the CBRTs average funding rate and corporate and automobile loans. Lastly, our findings generally reveal that the CBRTs average funding rate is much more influential on bank loan and deposit rates compared with the BIST O/N rate.
Unconventional monetary policy, interest rate pass-through, bank loan rates, bank deposit rates, structural breaks, structural break.