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Title: Interest rate dynamics in Kenya: Commercial banks’ rates and the 91-Day Treasury bill rate
Authors: Caporale, GM
Gil-Alana, LA
Keywords: Fractional integration;Long-range dependence;Interest rates
Issue Date: 2010
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 10-27
Abstract: This paper analyses the implicit dynamics underlying the interest rate structure in Kenya. For this purpose we use data on four commercial banks’ interest rates (Deposits, Savings, Lending and Overdraft) together with the 91-Day Treasury Bill rate, for the time period July 1991 – August 2010, and apply various techniques based on long-range dependence and, in particular, on fractional integration. The results indicate that all series examined are nonstationary with orders of integration equal to or higher than 1. The analysis of various spreads suggests that they also are nonstationary I(1) variables, the only evidence of mean reversion being obtained in the case of the Deposits – Treasury Bill rate spread with autocorrelated errors.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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