The Relationship between Deposit and Lending Rates in Namibia
Keywords:Deposit interest rate, lending interest rate, linear, symmetric, imperfect competition, mark-up theory, error correction models, Namibia
This paper analyses the relationship between deposit interest rates and lending interest rates in Namibia. The objective is to test whether a linear and symmetric relationship holds for Namibia in the long run. Using monthly data for the period 1992:01 â€“ 2012:12, the paper employed time series techniques, namely, unit root tests, and the cointegration test. The unit root test revealed that the series are non- stationary. The cointegration test showed that there is no cointegration among the variables. Hence, there is no long-run relationship between the deposit interest rate and the lending interest rate in Namibia. The study rejects the hypothesis of a linear and symmetric relationship in the Namibian context. In the absence of cointegration the study could not proceed with the Granger causality test.
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