Department of Economics, Rhodes University, Grahamstown, South Africa. Email: aezeoha@yahoo.co.uk
1813-6982/asset/olbannerleft.gif?v=1&s=064034e0e275cb93382cc98de88e7b73e8874354)
1813-6982/asset/olbannerright.gif?v=1&s=34db308c1ef0a2d7f87205bc4fd73fc1d3e0154b)
SOUTH AFRICAN MARKET VOLATILITY, ASYMMETRY AND RETAIL INTEREST RATES PASS-THROUGH
Article first published online: 18 JUN 2012
DOI: 10.1111/j.1813-6982.2011.01291.x
© 2012 The Authors. Journal compilation © 2012 Economic Society of South Africa
Additional Information
How to Cite
FADIRAN, G. O. and EZEOHA, A. (2012), SOUTH AFRICAN MARKET VOLATILITY, ASYMMETRY AND RETAIL INTEREST RATES PASS-THROUGH. South African Journal of Economics, 80: 157–180. doi: 10.1111/j.1813-6982.2011.01291.x
- †
Department of Economics, Rhodes University, Grahamstown, South Africa. Email: aezeoha@yahoo.co.uk
Publication History
- Issue published online: 18 JUN 2012
- Article first published online: 18 JUN 2012
- Abstract
- Article
- References
- Cited By
Keywords:
- C22;
- D53;
- E52;
- E58
- Interest rates pass-through;
- asymmetric ECM;
- ECM-EGARCH model;
- interest volatility;
- leverage;
- South Africa
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 error-correction model (ECM) and the adjusted ECM-exponential generalised autoregressive conditional heteroscedasticity (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 symmetric deposit interest rate adjustment process in South Africa.