Asymmetry of the Interest Rate Pass-through in Zambia

Patrick Chileshe and Olusegun Akanbi

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Asymmetry; Symmetry; Interest rate Pass-through; ARDL; Non-linear ARDL; Zambia (search for similar items in EconPapers)
JEL-codes: E00 E43 E51 E52 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82673

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