Browsing by Author "NAKAWALA, Natasha"

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    An Evaluation of the Impact of Statutory Reserve Requirements on Economic Stability in Zambia: A Macroeconomic Perspective (2023Q1 – 2024Q2)
    (University of Lusaka, 2025) NAKAWALA, Natasha
    This study examines the impact of Statutory Reserve Ratio (SRR) adjustments on economic stability in Zambia from 2013Q1 to 2024Q2. Economic stability is assessed through four macroeconomic indicators: inflation rate, exchange rate, interest rates, and GDP growth. The study aims to analyze the relationship between SRR adjustments and inflation, examine their impact on the exchange rate, assess their effect on interest rates, and evaluate their influence on GDP growth. The Vector Error Correction Model (VECM) was employed, preceded by stationarity tests using the Augmented Dickey-Fuller (ADF) test and cointegration analysis via the Johansen test. The findings indicate that SRR adjustments have statistically significant effects on macroeconomic variables both in the short and long run. In the short run, an increase in SRR led to a rise in GDP, an increase in inflation, and a depreciation of the exchange rate, suggesting limited immediate stabilizing effects. However, in the long run, SRR adjustments contributed to economic stability by promoting GDP growth, reducing inflation, increasing lending rates, and stabilizing the exchange rate. The study focuses on the 2013Q1–2024Q2 period to capture a full cycle of monetary policy adjustments, including multiple SRR changes implemented by the Bank of Zambia in response to varying macroeconomic conditions. This period provides a comprehensive dataset for evaluating both short- and long-term impacts of SRR adjustments. The findings have key policy implications for central bank decision-making. A carefully calibrated SRR policy can enhance economic stability by balancing inflation control, exchange rate stability, and economic growth. The study recommends that monetary authorities complement SRR adjustments with other policy tools to mitigate unintended consequences on credit availability and investment. Future research could explore how SRR interacts with broader fiscal policies to improve macroeconomic outcomes.