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The Impact of Informal Economy on the Interest Rate Pass-through: Evidence from an ARDL model

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  • Patrick, Chileshe M.
  • Akanabi, Olusegun Ayodele

Abstract

In this study, we investigated the impact of the size of the informal economy on the interest rate pass-through. Results from an ARDL model showed that higher levels of the informal sector are associated with higher lending rates. Furthermore, the results indicated that the effect of the informal economy is much stronger in the long-run compared to the short-run. Finally, the results indicated that in both the short run and long run existence of an informal economy dampens the transmission of changes in the policy rate to retail rates as expected from theory and empirical evidence

Suggested Citation

  • Patrick, Chileshe M. & Akanabi, Olusegun Ayodele, 2017. "The Impact of Informal Economy on the Interest Rate Pass-through: Evidence from an ARDL model," African Journal of Economic Review, African Journal of Economic Review, vol. 5(2), July.
    • Handle: RePEc:ags:afjecr:264569
    DOI: 10.22004/ag.econ.264569
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    References listed on IDEAS

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    Cited by:

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    2. Lahlou, Kamal & Doghmi, Hicham & Schneider, Friedrich, 2020. "The Size and Development of the Shadow Economy in Morocco," Document de travail 2020-3, Bank Al-Maghrib, Département de la Recherche.
    3. Peters Idowu & Yaaba N. Baba & Adetoba O. Olufunso & Tomologu-Okunomo E. Aduni & Tonuchi E. Joseph, 2020. "How Effective is Monetary Policy in the Presence of High Informality in Nigeria," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 10(2), pages 84-93.

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