Interbank Market and Effectiveness of Monetary Policy in Malawi

The study aimed at investigating how the interbank market affects the monetary policy transmission mechanism in Malawi. To achieve that, the study analyzed the nature of the relationship between excess reserves and the interbank market rate and tried to discuss other possible factors that affect the interbank market rates in Malawi and limit the effectiveness of the central bank’s efforts that aim at influencing important interest rates in the economy. The study further analyzed the strength and speed at which the interbank market rate affects other money market rates, specifically the lending rate.