For this question, refer to the Bank of Ghanas Monetary Policy Committee Press Release of May 21, 2018. Hint Bank of Ghana slashes policy rate to an over four-year low

a) There has been concerns among businesses that the recent reductions in the MPR has not led to significant decreases in bank lending rates. What do you think could be accounting for this? What additional measures can policy-makers undertake to reduce the cost of borrowing in the country?

b) 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. =0.4+0.2+(1)0.4 Where MPR is the monetary policy rate, IBR is the Interbank interest rate, Tbill rate on the 91-day treasury bill, CRR is the cash reserve ratio and CIV is the cash in vault ratio.