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

Daniel Sakyi, Isaac Osei Mensah, Samuel Kwabena Obeng

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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.
Original languageEnglish
Pages (from-to)417-434
Number of pages18
JournalJournal of African Business
Volume18
Issue number4
Early online date20 Jul 2017
DOIs
Publication statusPublished - 2017

Keywords

  • Inflation targeting
  • interest rates transmission
  • monetary policy
  • cointegration
  • Ghana

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