Journal of Finance and Bank Management

Macroeconomic Determinants of Interest rate Spread in Ghana: Evidence from ARDL Modelling Approach
Ibrahim M. Sheriff, Gilbert K. Amoako

Abstract
The Ghanaian economy appears to be in a certain cycle of high lending and low borrowing rates culminating in wide interest rate spreads. A number of studies point to the fact that the spread between the lending rates and borrowing rates is too wide to promote efficient financial intermediation between savers and borrowers but failed to look at macroeconomics effect on the interest rate spread in Ghana. This study contributes to the discussion by evaluating the macroeconomic variables (factors) that affect the interest rate spread with a view to determining their shortterm and long-term relationships for policy recommendations that will serve the interest of all stake holders in the financial services' sector and the general Ghanaian economy. Using autoregressive distributed lag (ARDL) cointegration and Vector Error Correction analysis, we observed both short-run and long run relationship between identified macroeconomics variables and interest rate spread in Ghana. The study recommends that, government borrowing, interest and inflation rate are kept low while pursuing policies that maximise savings.

Full Text: PDF