South African money market volatility, asymmetry and retail interest pass-through

Fadiran, Gideon Oluwatobi (2011) South African money market volatility, asymmetry and retail interest pass-through. Masters thesis, Rhodes University.

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Abstract

The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.

Item Type:Thesis (Masters)
Uncontrolled Keywords:Money market, South Africa, Interest rates, Monetary policy, Econometric models, Banks and banking
Subjects:H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
Divisions:Faculty > Faculty of Commerce > Economics and Economic History
ID Code:2111
Deposited By: Ms Chantel Clack
Deposited On:14 Oct 2011 07:54
Last Modified:06 Jan 2012 16:22
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