Interest Rate PassThrough in Malawi: Implications for Effectiveness of Monetary Policy
Date
2020-08-05
Authors
Chiumia, Austin
Palamuleni, Arnold
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
This study investigated the interest rate pass-through and its implications for
monetary policy effectiveness in Malawi. Using the cost-of-funds approach and
monthly data from 2009 to 2015, an autoregressive distributed lag model was
estimated. Results suggest that the structure of the banking industry (banking
environment) matters. Also, market power is important in understanding the
resulting variation in the savings and lending rates across banks in the market
as well as the transmission of monetary policy impulses. Overall, our findings
suggest that short-term rates as operating target are consistent with inflation
targeting as a monetary policy objective.