Monetary Policy and Lending Rates of Commercial Banks in Ghana

Generally, it has been the norm for various functional offices and administrative bodies to achieve their desired long-term and short-term objectives through the use of special tools and mechanism. The Bank of Ghana have over the past decades relied on a number of strategies to influence the environment though which they serve and regulate. The aim of the study is to investigate if there exists a relationship between monetary policy and interest rates. It also assesses the efficiency of the level of pass-through while a further consideration is being made towards understanding the influence and relationship between non-monetary policy factors and lending rates. The datasets were clearly defined with its sources being the Bank of Ghana and International Monetary Fund. Primarily, the study used the Autoregressive Distributed Lag (ARDL) and Bounds Tests to examine the aims and hypothesis of the study. Strict adherence was made to diagnostics tests to ensure the model is stable and functional. Monetary policy rate was identified to have a relationship with lending rate with a very slow rate of adjustment. Although there is efficiency in pass-though, it is in its poorest state. The study also identified that liquidity is the primary non-monetary policy factor that influences lending rates at 15% with a positive relationship although statistically insignificant. The study further recommended that supervisory roles should be strengthen to facilitate compliance.