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Monetary Policy Transmission in Ghana; Does the Interest Rate Channel Work?

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  • Arto Kovanen

Abstract

This paper analyzes interest rate pass-through in Ghana. Time series and bank-specific data are utilized to highlight linkages between policy, wholesale market, and retail market interest rates. Our analysis shows that responses to changes in the policy interest rate are gradual in the wholesale market. Prolonged deviation in the interbank interest rate from the prime rate illustrate the challenges the Bank of Ghana faces when targeting a short-term money market interest rate. Asymmetries in the wholesale market adjustment possibly relate to monetary policy signaling, weak policy credibility, and liquidity management. In the retail market, pass-through to deposit and lending interest rates is protracted and incomplete.1

Suggested Citation

  • Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana; Does the Interest Rate Channel Work?," IMF Working Papers 11/275, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/275
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    References listed on IDEAS

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    1. Alexander F. Tieman, 2004. "Interest Rate Pass-Through in Romania and Other Central European Economies," IMF Working Papers 04/211, International Monetary Fund.
    2. Harald Sander & Stefanie Kleimeier, 2006. "Interest Rate Pass-Through In The Common Monetary Area Of The Sacu Countries," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 215-229, June.
    3. Huberto M. Ennis & Todd Keister, 2008. "Understanding monetary policy implementation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 235-263.
    4. Kwapil, Claudia & Scharler, Johann, 2010. "Interest rate pass-through, monetary policy rules and macroeconomic stability," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 236-251, March.
    5. Boris Hofmann & Paul Mizen, 2004. "Interest Rate Pass-Through and Monetary Transmission: Evidence from Individual Financial Institutions' Retail Rates," Economica, London School of Economics and Political Science, vol. 71, pages 99-123, February.
    6. Liu, Ming-Hua & Margaritis, Dimitri & Tourani-Rad, Alireza, 2008. "Monetary policy transparency and pass-through of retail interest rates," Journal of Banking & Finance, Elsevier, vol. 32(4), pages 501-511, April.
    7. Johan Mathisen & Thierry D. Buchs, 2005. "Competition and Efficiency in Banking; Behavioral Evidence from Ghana," IMF Working Papers 05/17, International Monetary Fund.
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    Citations

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    Cited by:

    1. Nomahlubi Mavikela & Simba Mhaka & Andrew Phiri, 2018. "The inflation-growth relationship in SSA inflation targeting countries," Working Papers 1801, Department of Economics, Nelson Mandela University, revised Jan 2018.
    2. Chileshe, Patrick Mumbi & Akanbi, Olusegun Ayodele, 2016. "Asymmetry of the Interest Rate Pass-through in Zambia," MPRA Paper 82673, University Library of Munich, Germany.
    3. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:303-318 is not listed on IDEAS
    4. repec:taf:wjabxx:v:18:y:2017:i:4:p:417-434 is not listed on IDEAS
    5. David Nguyen-Thanh & Christoph Strupat, 2012. "Is the Burden Too Small? – Effective Tax Rates in Ghana," Ruhr Economic Papers 0389, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. repec:zbw:rwirep:0389 is not listed on IDEAS
    7. Nguyen-Thanh, David & Strupat, Christoph, 2012. "Is the Burden Too Small? – Effective Tax Rates in Ghana," Ruhr Economic Papers 389, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Ghana; Interest rate determination; monetary policy transmission; interest rates; monetary policy; central bank; inflation; money market; Money And Interest Rates;

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