Interest Rate Pass-Through in Cabo Verde

Author: Bruno Albuquerque and Mr. Nombulelo Gumata

This paper estimates the interest rate pass-through in Cabo Verde.

Volume/Issue: Volume 2026 Issue 019

Publication date: March 2026

ISBN: 9798229040297

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Topics covered in this book

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Banks and Banking , Finance , Inflation , Money and Monetary Policy , Cabo Verde , monetary policy transmission , interest rate pass-through , tightening cycle , IMF country , BCV interest rate , IMF staff , interest rate channel , Central bank policy rate , Interest rate policy , Domestic systemically important banks , Excess liquidity , Bank credit , Commercial banks , Global

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Summary

This paper estimates the interest rate pass-through in Cabo Verde. Using monthly data since 2001, we estimate a limited pass-through of monetary policy to banks’ lending rates: a 1-percentage-point policy rate change leads to a 0.19–0.28 increase in average lending rates and 0.13–0.23 in long-term rates. Pass-through is roughly twice as strong during tightening than easing cycles but remains weak overall, including in the current cycle started in May 2023, underscoring challenges for monetary policy transmission.