Impact of capital regulation on interest rate pass‐through in Sub‐Saharan Africa

Using monthly data from 2005 to 2019, we employ a dynamic heterogeneous cross-sectionally autoregressive distributed lag (CS-ARDL) model examine the impact of higher regulatory capital requirements on interest rate pass-through (IRPT) bank lending and deposit rates in 22 Sub-Saharan Africa (SSA) countries. Two key findings emerge investigation: (i) average IRPT SSA is incomplete long run, (ii) stringent (higher) reduce monetary policy commercial rates. The suggest that although are an effective macro-prudential tool for enhancing stability banking sector, they could also have unintended consequences limiting economic expansion. This trade-off calls careful analysis balance implementation policies region.