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Policy Brief: The Effects of Interest Rate Volatility and Money Demand in Sierra Leone using ARDL Estimation

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  • Daboh, Foday
  • Jackson, Emerson Abraham

Abstract

This policy brief investigates Sierra Leone's interest rate volatility, a recurring concern due to its economic instability. Using the ARDL model and bolstered by the stability exhibited in CUSUM and CUSUM square tests, we explore the impact of deposit and lending interest rates on money demand. Short-term findings reveal a positive effect of deposit rates and a negative effect of lending rates on money demand. However, in the long run, these effects become insignificant. To enhance economic stability, we suggest implementing a uniform interest rate for commercial banks and vigilant monitoring of competitive lending rates as policy measures.

Suggested Citation

  • Daboh, Foday & Jackson, Emerson Abraham, 2024. "Policy Brief: The Effects of Interest Rate Volatility and Money Demand in Sierra Leone using ARDL Estimation," MPRA Paper 121114, University Library of Munich, Germany, revised 06 Jan 2024.
    • Handle: RePEc:pra:mprapa:121114
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    File URL: https://mpra.ub.uni-muenchen.de/121114/1/MPRA_paper_121114.pdf
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    References listed on IDEAS

    as
    1. Emerson Abraham Jackson & Mohamed Samba Barrie & Leroy Johnson, 2021. "Impact Of Exchange Rate And Inflation On Commercial Banks’ Performance In Sierra Leone," Journal of Smart Economic Growth, , vol. 6(3), pages 67-95, December.
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      More about this item

      Keywords

      Sierra Leone; Interest Rate Volatility; Money Demand; ARDL Model;
      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
      • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
      • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
      • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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