Monetary Policy Transmission in Ghana: Does the Interest Rate Channel Work?

33 Pages Posted: 12 Dec 2011

See all articles by Arto Kovanen

Arto Kovanen

International Monetary Fund (IMF) - African Department

Date Written: November 2011

Abstract

This paper analyzes interest rate pass-through in Ghana. Time series and bank-specific data are utilized to highlight linkages between policy, wholesale market, and retail market interest rates. Our analysis shows that responses to changes in the policy interest rate are gradual in the wholesale market. Prolonged deviation in the interbank interest rate from the prime rate illustrate the challenges the Bank of Ghana faces when targeting a short-term money market interest rate. Asymmetries in the wholesale market adjustment possibly relate to monetary policy signaling, weak policy credibility, and liquidity management. In the retail market, pass-through to deposit and lending interest rates is protracted and incomplete.1

Keywords: Banks, Central bank policy, Financial systems, Interest rates, Monetary policy

Suggested Citation

Kovanen, Arto, Monetary Policy Transmission in Ghana: Does the Interest Rate Channel Work? (November 2011). IMF Working Paper No. 11/275, Available at SSRN: https://ssrn.com/abstract=1971426

Arto Kovanen (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

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