Question
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
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.
GRR = 0.4 * MPR + 0.2 IBR + (TREASURY BILL/1-CRR-CIV) * 0.4
Where MPR is the monetary policy rate, IBR is the interbank interest rate, treasury 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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