Asymmetry of the Interest Rate Pass-through in Zambia

Chileshe, Patrick Mumbi and Akanbi, Olusegun Ayodele (2016): Asymmetry of the Interest Rate Pass-through in Zambia. Forthcoming in: Contemporary Economics Journal

Abstract

This study undertook to investigate interest rate pass-through in Zambia with a focus on unravelling evidence on the asymmetric response of retail and bond yield rates to monetary policy controlled rates. The study utilise a non-linear ARDL model to investigate the relationship between policy-controlled rates and retail rates as well as bond yield rates. Based on the single-equation error correction model and the associated dynamic multipliers, the study is able to model asymmetries in both the long-run relationship and the pattern of dynamic adjustment simultaneously and in a coherent manner. In addition, the study present results from a symmetrical ARDL model. Results from the study support evidence to the existence of asymmetry in the response of retail and bond yield rates to changes in policy-controlled interest rates (interbank and 3-month rate). Specifically, there is a negative asymmetry in the response of deposit rates to changes in the interbank and 3-month rates while there is a positive asymmetry with regard to lending and bond yield rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asymmetry; Symmetry; Interest rate Pass-through; ARDL; Non-linear ARDL; Zambia
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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