GRR affect the transmission mechanism between the MPR and lending rates of commercial banks? Explain with reference to the 100 basis points reduction in the attached press release.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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g) In April 2018, the Bank of Ghana introduced a
new formula for calculating benchmark lending
rates by commercial banks, the Ghana
Reference Rate (GRR). How will the use of the
GRR affect the transmission mechanism
between the MPR and lending rates of
commercial banks? Explain with reference to the
100 basis points reduction in the attached press
release.
T bill
GRR = 0.4 * MPR + 0.2 * IBR* 0.4
Where MPR is the monetary policy rate, IBR is
the Interbank interest rate, T'bill rate on the 91-
day treasury bill, CRR is the cash reserve ratio
and CIV is the cash in vault ratio.
Transcribed Image Text:g) In April 2018, the Bank of Ghana introduced a new formula for calculating benchmark lending rates by commercial banks, the Ghana Reference Rate (GRR). How will the use of the GRR affect the transmission mechanism between the MPR and lending rates of commercial banks? Explain with reference to the 100 basis points reduction in the attached press release. T bill GRR = 0.4 * MPR + 0.2 * IBR* 0.4 Where MPR is the monetary policy rate, IBR is the Interbank interest rate, T'bill rate on the 91- day treasury bill, CRR is the cash reserve ratio and CIV is the cash in vault ratio.
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