Investigating the transmission of monetary policy through the bank lending channel in Namibia
Loading...
Date
2021
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Namibia
Abstract
Investigating the transmission of monetary policy is important for an economy. Many channels
exist through which monetary policy decisions affect the economy. This paper examines the bank
lending channel, which reflects the central bank's actions that affect loan supply and real spending.
It is necessary to understand how effective the channels of transmission are, in affecting economic
activities in a given country. This study investigates the transmission of monetary policy through
the bank lending channel in Namibia using four variables namely: gross domestic product (GDP),
interest rate, inflation and bank lending. The study used a Vector Auto-regression (V AR) approach
to estimate time series annual data from Q 1 2009 to Q4 2018. The study employed techniques such
as unit root tests, co-integration, impulse responses and variance decomposition. The co integration test results revealed that co-integration exists among variables. The impulse response
function showed that output growth responded negatively to repo rate. The increase in interest rate
results in a decline in economic activities due to high interest on borrowing and thus a decrease in
economic growth. The variance decomposition indicated that fluctuations in output growth were
attributed to itself. While the total contribution of interest rate, bank lending and inflation was
relatively insignificant. The error forecast of bank lending was attributed by itself with an
insignificant contribution of output growth and non by interest rate and inflation. Fluctuations in
forecasting interest rate were greatly attributed to bank lending and small contributions by the
other variables. The error forecast of inflation was greatly dominated by itself. As the trend fell,
there was a significant increase in the contribution of output growth and a slight contribution by
the other variables
Description
A thesis submitted in partial fulfilment of the requirements for the degree of Master of Business Administration (Management Strategy)
Keywords
Monetary policy transmission, Bank-lending channel, Time series annual data, Namibia, University of Namibia