This study examines the asymmetry of interest rate pass through between wholesale (KIBOR) and retail interest rates (deposit and lending rate), by using the asymmetric threshold cointegration proposed by Enders & Sikles (2001) and EC-EGARCH-M model proposed by Wong & Lee (2009) in case of Pakistan. In addition we also investigate volatility in interest rate. We find incomplete pass through among wholesale and retail interest rate. Threshold co-integration test result shows that then asymmetric co-integration relation exits in both the models i.e. deposit and lending interest rate model. There is upward adjustment in EC-EGARCH-M model and we found that there is downward rigidity in the adjustment parameters for the retail interest rate. Supervisor:- Dr. Wasim Shahid Malik