Asymmetric adjustment of commercial bank interest rates: Evidence from Malaysia and Singapore

This paper examines the rigidity of commercial bank interest rates, using evidence from Singapore and Malaysia. An asymmetric error correction technique is used to test whether mean adjustment lags are different when retail rates are above or below their equilibrium levels. It is concluded, in both countries, that the mean adjustment lag is shorter when the deposit rate is above its equilibrium than when it is below its equilibrium. Using the framework of Hannan and Berger (1991), this finding implies that the hypothesis of collusion cannot be rejected. (JEL G21). Copyright (C) 1996 Elsevier Science Ltd