Colombian banks adjust interest rates faster downwards, limiting monetary policy impact.
The study looked at how Colombian banks adjust their interest rates in response to changes in wholesale rates. They found that banks only partially pass on these changes to retail rates, and the extent of this varies between banks. Retail deposit rates tend to decrease faster than they increase, suggesting possible collusion among banks. On the other hand, retail lending rates decrease faster than they increase, indicating that expansionary monetary policy in Colombia may be more effective than contractionary policy.