Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis

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dc.contributor.advisorMakanza, Christine
dc.contributor.authorPuskas, Princess Refilwe
dc.date.accessioned2021-02-24T13:32:37Z
dc.date.available2021-02-24T13:32:37Z
dc.date.issued2020
dc.date.updated2021-02-24T11:52:24Z
dc.description.abstractThe many relationships among macroeconomic variables tend to follow a nonlinear path despite the more common linear assumptions. Previous research has shown that the speed at which macroeconomic variables fall is often rarely the same as the speed at which they rise, further suggesting the nonlinearity. This paper therefore aims to test the presence and impacts of the asymmetric effects of interest rates on savings, investment and economic growth by employing a Nonlinear Autoregressive Distributed Lag (NARDL) approach to the McKinnonShaw hypothesis in Botswana. More precisely, the study seeks to test the asymmetric effects of interest rates on the level of savings and investment and the impact of financial liberalisation on economic growth. Till date, there is very little empirical research investigating the asymmetric effects of interest rates, and even less research on this relationship in Botswana. The main contribution of this study is to fill in the research gap by analysing data for the period spanning 1995:Q1−2017:Q4. The study finds a positive relationship between real deposit rates and saving rates as well as a negative association between real bank lending rates and investment levels in the short run. Lastly, the financial liberalisation index is positively related to economic growth. These results are in line with the findings that liberalisation of interest rates generates more savings, investment and subsequently growth in the short run. However, the same does not hold for the long run results. It is therefore imperative that authorities formulate long run objectives aimed at setting real deposit rates at competitive levels to boost savings, encourage investment and promote economic growth in Botswana.
dc.identifier.apacitationPuskas, P. R. (2020). <i>Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis</i>. (). ,Faculty of Commerce ,School of Economics. Retrieved from http://hdl.handle.net/11427/32968en_ZA
dc.identifier.chicagocitationPuskas, Princess Refilwe. <i>"Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis."</i> ., ,Faculty of Commerce ,School of Economics, 2020. http://hdl.handle.net/11427/32968en_ZA
dc.identifier.citationPuskas, P.R. 2020. Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis. . ,Faculty of Commerce ,School of Economics. http://hdl.handle.net/11427/32968en_ZA
dc.identifier.ris TY - Master Thesis AU - Puskas, Princess Refilwe AB - The many relationships among macroeconomic variables tend to follow a nonlinear path despite the more common linear assumptions. Previous research has shown that the speed at which macroeconomic variables fall is often rarely the same as the speed at which they rise, further suggesting the nonlinearity. This paper therefore aims to test the presence and impacts of the asymmetric effects of interest rates on savings, investment and economic growth by employing a Nonlinear Autoregressive Distributed Lag (NARDL) approach to the McKinnonShaw hypothesis in Botswana. More precisely, the study seeks to test the asymmetric effects of interest rates on the level of savings and investment and the impact of financial liberalisation on economic growth. Till date, there is very little empirical research investigating the asymmetric effects of interest rates, and even less research on this relationship in Botswana. The main contribution of this study is to fill in the research gap by analysing data for the period spanning 1995:Q1−2017:Q4. The study finds a positive relationship between real deposit rates and saving rates as well as a negative association between real bank lending rates and investment levels in the short run. Lastly, the financial liberalisation index is positively related to economic growth. These results are in line with the findings that liberalisation of interest rates generates more savings, investment and subsequently growth in the short run. However, the same does not hold for the long run results. It is therefore imperative that authorities formulate long run objectives aimed at setting real deposit rates at competitive levels to boost savings, encourage investment and promote economic growth in Botswana. DA - 2020_ DB - OpenUCT DP - University of Cape Town KW - Economics LK - https://open.uct.ac.za PY - 2020 T1 - Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis TI - Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis UR - http://hdl.handle.net/11427/32968 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/32968
dc.identifier.vancouvercitationPuskas PR. Testing the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis. []. ,Faculty of Commerce ,School of Economics, 2020 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/32968en_ZA
dc.language.rfc3066eng
dc.publisher.departmentSchool of Economics
dc.publisher.facultyFaculty of Commerce
dc.subjectEconomics
dc.titleTesting the asymmetric effects of Interest Rates in Botswana: A NARDL Approach to the McKinnon-Shaw hypothesis
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationlevelMCom
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