Monetary Policy Pass-through to Firms and Households in Zambia
DOI:
https://doi.org/10.51867/ajernet.7.1.130Keywords:
Monetary Policy, Pass-through, NARDL, Lending Rates, ZambiaAbstract
This paper examines monetary policy pass-through from the interbank rate to SME, corporate, personal, and mortgage lending rates in Zambia using monthly data from April 2012 to July 2022. Employing cointegration techniques and nonlinear time-series models, the study estimates both long-run and short-run transmission and assess asymmetry in adjustment following monetary tightening and easing. Results show incomplete and heterogeneous pass-through across borrower segments, with stronger transmission in SME and personal lending rates and weaker adjustment in corporate and mortgage lending rates. Evidence of significant asymmetry is found, with banks adjusting more rapidly to monetary tightening than easing. Pass-through is further found to weaken during the 2015–2016 macroeconomic crises and the COVID-19 period, indicating increased financial frictions. The findings highlight structural rigidities in Zambia’s credit market and suggest targeted policy measures to improve monetary transmission.
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