AN EMPIRICAL ANALYSIS OF THE DETERMINANTS OF INTEREST RATES IN ZIMBABWE

Thabani Nyoni
Department of Economics, University of ZimbabweHarare, Zimbabweand

Samuel Chikamhi
Department of Economics, Bindura University of Science EducationBindura, Zimbabwe  


Abstract
The study seeks to investigate the determinants of interest rate in Zimbabwe under the multicurrency system (2009 – 2014). Secondary data was used to find the determinants of interest rate using an Ordinary Least Squares (OLS) model. The results of various diagnostic tests that we conducted indicate that our estimated model is statistically appropriate. The study found out that the main determinants of interest rate are money supply, political environment, and exchange rates. The study, amongst other policy recommendations, encourages a stable political environment and or policies that guarantee investor confidence, in order to increase the level of investment in Zimbabwe.

Key words: Exchange rate, Gross Domestic Product (GDP), Inflation, Interest Rates, Money Supply, Political Environment, Zimbabwe


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