Policy Transmission Through Banking: Evidence from Namibia

This paper estimates the strength of monetary policy transmission to bank lending and deposit rates in Namibia under a pegged exchange rate regime. Using local projections, it quantifies the pass-through of domestic and South African policy rates to aggregate banking interest rates. The results show that the pass-through is primarily driven by the South African Reserve Bank policy rate, while the effects of domestic policy rates are weaker and less persistent. Transmission is also asymmetric: lending rates adjust rapidly and completely, reflecting the prevalence of variable-rate contracts and their linkage to prime rate, while deposit rates respond more slowly and incompletely, consistent with differences in funding structures and pricing behavior across banks.