Interest Rate Pass-Through in Nigeria

Olajide Oyadeyi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examined interest rate pass-through in Nigeria using monthly data from 2006 to 2020. It focused on the pass-through process from the policy rate to the money market and retail rates and from the pass-through of the money market rates to the retail rates. The results showed that there was an incomplete short-run pass-through with a higher degree from the policy rate to the money market rate, while the pass-through process over-shoot in the long run. However, this pass-through was found to be very weak and incomplete from the policy rate to the retail rates and from the money market rates to the retail rates. The mean adjustment lags suggested that it takes a quicker period for policy rate changes to fully reflect on the money market and retail segment of the market. Finally, the deposit rates were found to respond more significantly, albeit slowly, to changes in the policy and interbank rates compared to the lending rates. In essence, we recommend that the monetary authorities critically appraise the size of interest rate pass-through to the retail and money market rates in light of the heterogeneous response from the policy rate to the retail and money market rates.

Keywords: Interest Rate Pass-Through; Monetary Policy Rate; Lending Rates, Deposit Rates and; Interbank Rates (search for similar items in EconPapers)
JEL-codes: E4 E42 E43 E51 E52 E58 (search for similar items in EconPapers)
Date: 2022-04-18
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Economics and Development Studies 2.10(2022): pp. 49-62

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117954

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