ASYMMETRIES IN THE PERUVIAN LENDING-DEPOSIT RATE SPREAD

This study examines the asymmetric behavior of the lending-deposit rate spread in the Peruvian banking system over the period of 1991:9 to 2005:9. The threshold autoregressive (TAR) model did not reveal any asymmetry However, the momentum threshold autoregressive (MTAR) model revealed asymmetric adjustments in the lending-deposit rate spread in the Peruvian banking industry This result parallels those findings reported by Thompson (2006) for the U.S. The speed of adjustment is slower when the lending-deposit rate spread is widening than it is when the spread is narrowing Also, the partial F-statistics corresponding to causality from the estimated asymmetric error correction model reveal that both the Peruvian lending rate and deposit rate affect movement in each other's rates. These findings paralleled those reported by Thompson (2006) on the US. prime rate and the 1- month CD rale.