An Empirical Analysis of the Determinants of Interest Rates in Ghana

This paper provides an empirical analysis of the determinants of the bank lending rate in Ghana using annual time series data from 1970 to 2013. We found evidence of a long-run equilibrium relationship between the average lending rate charged by commercial banks and its determining factors. In the l...

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Bibliographic Details
Published inJournal of African business Vol. 17; no. 3; pp. 377 - 396
Main Authors Asamoah, Lawrence Adu, Adu, George
Format Journal Article
LanguageEnglish
Published Binghamton Routledge 01.09.2016
Taylor & Francis Ltd
Subjects
ARDL
Bank loans
commercial banks
fiscal policy
Foreign exchange rates
GDP
Ghana
Gross Domestic Product
interest rate
Monetary policy
Studies
Time series
Ghana
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Summary:This paper provides an empirical analysis of the determinants of the bank lending rate in Ghana using annual time series data from 1970 to 2013. We found evidence of a long-run equilibrium relationship between the average lending rate charged by commercial banks and its determining factors. In the long run, bank lending rates in Ghana are positively influenced by nominal exchange rates and Bank of Ghana's monetary policy rate but negatively with fiscal deficit, real GDP and inflation. We also find positive dependence of the bank lending rate on exchange rates, and the monetary policy rate both in the short and long run. Specifically, our findings reveal that the Bank of Ghana's monetary policy rate and the exchange rate, by far, show strong contemporaneous effects on the average bank lending rate in Ghana.
ISSN:1522-8916
1522-9076
1522-9076
DOI:10.1080/15228916.2016.1207493