Details of Research Outputs

Purpose: The authors examine the interest rate pass-through in Hong Kong (HK) and Macao both in the long term and short term.

Design/methodology/approach: The authors use time series methodology, i.e. unit root, cointegration and error correction models.

Findings: The results show that in the post-global financial crisis (GFC) period, both the long-run and short-run interest rate pass-through from policy rates to prime rates have disappeared in Macao and are weakened significantly in Hong Kong. The long-term relationship between deposit rates and policy rates no longer exists in either market while the short-term relationship has been reduced significantly.

Research limitations/implications: The results indicate that the effectiveness of monetary policy in HK and Macao has been seriously undermined in the post-GFC period. New tools are needed in both regions.

Practical implications: Monetary policy transmission via bank interest rates in both HK and Macao are no longer effective after the outbreak of the GFC. Social implications: Effort to stimulate the economy and/or control inflation will be hampered.

Originality/value: To the best of the authors' knowledge, this is the first study to examine the impact of the GFC on the effectiveness of monetary policy transmission in HK and Macao.