Volatility in the Interbank Rate and the Monetary Policy Implications in Nigeria: An Examination of the News Impact based on the Asymmetric GARCH Models

The role of the interbank rate in propelling the movement in the other interest rates has made studies focusing on the factors that shape its volatility paramount. This paper focused on determining the news impact of on the volatility in the interbank rate in Nigeria. Monthly dataset that spanned the period from 22006M1 to 2024M5 was used and two asymmetric  GARCH models were applied for estimation. Three error distributions were adopted and optimal model selection was facilitated by the Schwarz Information Criterion (SIC). Findings reveal that under the E-GARCH model, bad news significantly impacted on the volatility in the interbank rate. It was also found that recent past value of the interbank rate impacted significantly and positively on the current value. The study equally found that interbank rate is non-mean reverting. It is the suggestion of the researcher that monetary policy authorities should incorporate the news impact when fashioning out policies meant to influence the interbank rate to any desired end.