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Interest Rate Pass-Through, Financial Structure And Monetary Policy In South Africa

Author

Listed:
  • Meshach Jesse Aziakpono
  • Magdalene Kasyoka Wilson

    (University of Stellenbosch Business School)

Abstract

This paper investigates the pass-through of the official interest rate to market interest rates in South Africa, using symmetric and asymmetric error correction modelling techniques and monthly interest rates data for the period 1980 to 2007. The study found that the speed of adjustment of market interest rates is high, but differs across the rates. The highest speed occurs in the lending rate, followed by Treasury bill rate, money market rate and commercial bank deposit rate, while government bond yield shows the least speed. A test of commercial bank interest rates confirms asymmetric adjustment. Commercial banks are becoming increasingly competitive in the credit market, while the converse is true for the deposit market, where collusive behaviour among banks is evident.

Suggested Citation

  • Meshach Jesse Aziakpono & Magdalene Kasyoka Wilson, 2015. "Interest Rate Pass-Through, Financial Structure And Monetary Policy In South Africa," The African Finance Journal, Africagrowth Institute, vol. 17(1), pages 67-90.
    • Handle: RePEc:afj:journl:v:17:y:2015:i:1:p:67-90
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    Citations

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    Cited by:

    1. Xuejun Jin & Frank M. Song & Yizhong Wang & Yi Zhong, 2014. "Interest Rate Pass-through in a Dual-track System: Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(4), pages 21-39, July.
    2. Lartey, Lawrencia, 2018. "The Signalling Effect of Monetary Policy Rate on Lending Rates in Ghana," MPRA Paper 92244, University Library of Munich, Germany.

    More about this item

    Keywords

    Interest rates pass-through; monetary policy; asymmetric adjustment; South Africa; cointegration analysis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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