Exploring the asymmetric effect of lending rate on economic growth in Ghana: Evidence from nonlinear autoregressive distributed lag model

Figures & data

Table 1. Brief description of variables

Variable	Description	Expected effect
Lending rate (LR)	Lending rate is the rate of interest financial organizations and banks charge for lending money to individuals, firms, and small-scale enterprises. Simply put, it the rate of interest paid on loan to financial organizations and Banks. In Ghana, the average lending rate is determined by commercial banks. Hence, the commercial banks’ base rate in Ghana was used as a proxy for the market lending rate.	-/+
Gross domestic product (GDP)	Gross domestic product is normally defined it as the total final output produced in an economy or country irrespective of the nationality of the producers. Real GDP is total services and good an economy produced at a given time period which adjust for inflation.	?
Inflation (INF)	Inflation is the persistent increase in the general price of goods and services. We measured inflation with Consumer Price Index (CPI), which is the basket of goods and services a consumer can buy based on his income and the prices of goods and services.	-
Monetary policy rate (MPR)	Monetary policy is an action or policy adopted by monetary authorities or central bank of an economy to control interest rate on short-term borrowing or money supply. The monetary policy rate is determined by the central bank of every economy depending on other macroeconomic indicator such inflation, interest rate, exchange rate, unemployment, and others. In this study, we used Bank of Ghana’s monetary policy rate as a proxy for monetary policy.	_
Exchange rate (EXCR)	Exchange rate is well known as the value of a country’s currency relative to another country’s currency. This study considers the cedi/dollar exchange rate as a measure of exchange rate.	_
Foreign direct Investment (FDI)	The study defined foreign direct investment as a category of cross border investments made by non-resident in the economy. FDI includes the sum total of value of reinvested earnings of foreigners, value of affiliated equity and net inter-company.	+

Table 2. Descriptive statistics

Variables	Observations	Minimum	Maximum	Mean	Std. Deviation	Skewness	Kurtosis
LnLR	49	1.297	2.977	2.371	0.501	0.220	0.818
LnGDP	49	1.194	2.642	1.642	0.355	1.108	0.073
LnMPR	49	2.526	3.807	3.134	0.394	0.496	1.046
LnFDI	49	1.381	2.253	1.119	1.024	0.142	0.843
LnINF	49	1.964	4.085	2.861	0.514	1.541	2.280
LnEXCR	49	0.033	4.351	1.137	1.269	0.331	1.234

Note: N and Std represent number of observation and standard deviation respectively.

Table 3. Unit root test results

	ADF test with intercept				PP test with intercept
Variables	Level	1^st difference	I(d)	Level	1^st difference	I(d)
lnGDP	−3.095**	6.816***	I(0)	−3.611**	6.562***	I(0)
lnLR	1.6460	−6.435***	I(1)	−1.546	−4.275***	I(1)
lnMPR	−2.732	−3.005***	I(1)	−1.739	−4.275**	I(1)
lnFDI	−2.648	−4.342***	I(1)	−2.325	−5.315**	I(1)
LnINF	−3.449*	−5.362***	I(0)	−3.128*	−5.667***	I(0)
lnEXCR	−1.484	−3.990**	I(1)	−1.656	−4.943**	I(1)

Source: Author’s elaboration based WDI and Bank of Ghana data. Augmented Dickey Fuller and Philip-Perron (PP) test results. Note: ***, **, and * represent significance at 1%, 5% and 10% respectively.

Table 4. Zivot and Andrews unit root structural break test

Variable	Level T-statistic	Time Break	First Difference T-statistic	Time break
lnGDP	−7.013**	2001	−9.181**	1975
lnLR	−2.021	1991	−7.427**	2011
lnMPR	−0.801	2009	−9.021**	2016
lnFDI	−1.001	1999	−6.219**	2013
lnEXCR	−4.321**	2011	−4.921**	1993

Note: Source: Author’s elaboration based WDI and Bank of Ghana data. Note: ***, **, and * represent significance at 1%, 5% and 10% respectively.

Table 5. Bounds test Co-integration test results

Dependent variables	F-statistics	P-value	K = 5
FGDP (GDP|LR, MPR, FDI, INF, EXCR)	12.376	0.002
Critical Value		Lower bound		Upper bound
1%		5.112		6.012
5%		7.394		10.381

Source: Authors estimates based on WDI and Bank of Ghana data. K denotes the number of regressors in the equation.

Table 6. Estimated long-run results

Variable	Coefficient	Std. Error	T-Statistic
$\mathit{\text{lnL}}{R}^{+}$	−0.151**	0.016	−9.438
$\mathit{\text{lnL}}{R}^{-}$	0.214**	0.031	6.903
lnMPR	−0.504**	0.061	−8.262
lnFDI	0.732**	0.126	5.809
lnINF	−0.881**	0.151	−5.834
lnEXCR	0.439**	0.037	11.864
Constant	1.422*	0.309	4.602

***represent significant levels 1%, ** represent 5% and * represent 10% level of significance. $L{R}_t^{+}$ and $L{R}_t^{-}$ represent positive (increase in lending rate) and negative (decrease in lending rate) changes in lending rate, respectively.

Table 7. Estimated short-run results using the NARDL

Variable	Coefficient	Std. Error	T-Statistic
∆ln $L{R}_t^{+}$	−0.213***	0.032	−6.656
∆ln $L{R}_{t-1}^{+}$	−0.205**	0.031	−6.612
∆ln $L{R}_t^{-}$	0.677*	0.139	4.871
∆ln $L{R}_{t-1}^{-}$	0.248**	0.046	5.391
∆ln $L{R}_{t-2}^{-}$	0.896**	0.142	6.309
∆ln $\mathit{\text{FD}}{I}_t$	0.459***	0.073	6.287
∆ln $\mathit{\text{FD}}{I}_{t-1}$	0.296***	0.034	8.706
∆ln $\mathit{\text{EXC}}{R}_t$	0.819**	0.162	5.055
∆ln $\mathit{\text{EXC}}{R}_{t-1}$	0.138*	0.032	−4.312
∆ln $\mathit{\text{IN}}{F}_t$	−0.642**	0.089	−7.213
∆ln $\mathit{\text{IN}}{F}_{t-1}$	−0.438**	0.113	−3.876
∆ln $\mathit{\text{MP}}{R}_t$	−0.890***	0.105	−8.476
∆ln $\mathit{\text{MP}}{R}_{t-1}$	−0.505*	0.135	−3.741
ECM (−1)	−0.365***	0.051	−7.157
R-square	0.949
Adjusted R-square	0.826
Durbin-Waston test	2.278
F-statistic	13.779
Prob (F-statistics)	0.001

***represent significant levels 1%, ** represent 5% and * represent 10% level of significance. $L{R}_t^{+}$ and $L{R}_t^{-}$ represent positive (increase in lending rate) and negative (decrease in lending rate) changes in exchange rate, respectively.

short-legendFigure 1.

Table 8. Diagnostic and reliability test results

Diagnostic test	Test approach	Test Statistics	Prob. Value
Normality	Jarque-Bera test	0.4014	0.418
Serial correlation	Breusch- Godfrey LM test	2.1535	0.272
Heteroskedasticity	Breusch-Pagan-Godfrey test	0.7422	0.471
Functional form	Ramsey reset test	0.2311	0.120
Wald short run	Wald test	6.131	0.012
Wald long run	Wald test	7.012	0.001
Stability test	CUSUM test	Stable
Stability test	CUSUMQ test	Stable

Source: Author’s elaboration based on World Bank (2019) and Bank of Ghana (2019) data.