Threshold cointegration and interest rate pass-through during the pre- and post-banking consolidation in Nigeria: are there asymmetries? Online publication date: Fri, 25-Nov-2016
by Alhaji Jibrilla Aliyu; Normaz Wana Ismail
International Journal of Banking, Accounting and Finance (IJBAAF), Vol. 7, No. 2, 2016
Abstract: This paper empirically examines the interest rate pass-through in Nigeria using the cointegration and threshold adjustment suggested by Enders and Siklos. The focus is on the pass-through of the central bank policy rates to the commercial banks' lending rates during the pre- and post-bank consolidation in the country. The estimated results indicate that, changes in the policy rate are transmitted completely to loans rate in the long run during the pre-cosolidation but incomplete during the post-consolidation period. The results also show evidence for asymmetric momentum threshold autoregression models during the both the pre-and post-consolidation periods. However, while the estimated nonlinear error correction models exhibit downward rigidity in lending rates during the pre-consolidation, a contrary finding was obtained during the post-consolidation period, which indicates upward rigidity of loans rates. Finally, the study discusses the potential implication of these findings on the banking sector and offers direction for future policy.
Online publication date: Fri, 25-Nov-2016
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