Recent changes in the prime rate behavior

Recent changes in the prime rate behavior This study presents evidence that, since the early 1990s, the prime rate has become more responsive to changes in money market conditions. More important, the evidence indicates that the responsiveness of the prime rate is independent of the direction in the movement of market interest rates, but is related to uncertainty regarding the direction in the movement of market interest rates. These findings are inconsistent with the literature suggesting that adjustment of the prime rate is asymmetric in the sense that it follows market interest rates more closely in upward movement than in downward movement. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Recent changes in the prime rate behavior

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-009-0127-x
Publisher site
See Article on Publisher Site

Abstract

This study presents evidence that, since the early 1990s, the prime rate has become more responsive to changes in money market conditions. More important, the evidence indicates that the responsiveness of the prime rate is independent of the direction in the movement of market interest rates, but is related to uncertainty regarding the direction in the movement of market interest rates. These findings are inconsistent with the literature suggesting that adjustment of the prime rate is asymmetric in the sense that it follows market interest rates more closely in upward movement than in downward movement.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: May 26, 2009

References

  • The sensitivity of the prime rate to money market conditions
    Goldberg, M

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