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Inflation Targeting Framework and Interest Rates Transmission in Ghana: An Empirical Investigation

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  • Daniel Sakyi
  • Isaac Osei Mensah
  • Samuel Kwabena Obeng

Abstract

This paper investigates the long-and short-run rate of transmission of the prime rate to interest rates since the implementation of inflation targeting policy in Ghana. Monthly data covering the period January 2002 to March 2016 is used. The Johansen and Hansen parameter instability cointegration, the FMOLS and DOLS estimation procedures were used. The long-run results show incomplete pass-through of the prime rate to commercial banks’ lending and deposit rates but over pass-through to the 91-day Treasury bill rate. The short-run adjustment shows relatively slow transmission of the prime rate to the respective interest rates. Given the findings, relevant policy suggestions are provided.

Suggested Citation

  • Daniel Sakyi & Isaac Osei Mensah & Samuel Kwabena Obeng, 2017. "Inflation Targeting Framework and Interest Rates Transmission in Ghana: An Empirical Investigation," Journal of African Business, Taylor & Francis Journals, vol. 18(4), pages 417-434, October.
    • Handle: RePEc:taf:wjabxx:v:18:y:2017:i:4:p:417-434
    DOI: 10.1080/15228916.2017.1327299
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    References listed on IDEAS

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    1. Mr. Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana: Does the Interest Rate Channel Work?," IMF Working Papers 2011/275, International Monetary Fund.
    2. Anna Sznajderska, 2012. "On the empirical evidence of asymmetry effects in the interest rate pass-through in Poland," NBP Working Papers 114, Narodowy Bank Polski.
    3. Philip Lowe & Thomas Rohling, 1992. "Loan Rate Stickiness: Theory and Evidence," RBA Research Discussion Papers rdp9206, Reserve Bank of Australia.
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    Cited by:

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