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Asymmetry of the Interest Rate Pass-through in Zambia

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  • Chileshe, Patrick Mumbi
  • Akanbi, Olusegun Ayodele

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.

Suggested Citation

  • Chileshe, Patrick Mumbi & Akanbi, Olusegun Ayodele, 2016. "Asymmetry of the Interest Rate Pass-through in Zambia," MPRA Paper 82673, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82673
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    File URL: https://mpra.ub.uni-muenchen.de/82673/1/MPRA_paper_82673.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetry; Symmetry; Interest rate Pass-through; ARDL; Non-linear ARDL; Zambia;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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