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This study aims to examine the effect of financial inclusion (FI) and financial openness (FO) on the development of capital markets in Africa.

The study uses data from 34 countries over 18 years (2004–2021) and adopts the panel autoregressive distributed lag and pooled mean group approach, with economic growth, trade openness, government expenditure and institutional quality as control variables.

The analysis reveals that both FI and FO contribute to the long-term development of capital markets across all income levels within the sampled countries. The interaction between FI and FO enhances capital market development (CMD) over the long run. This finding indicates that FO particularly enhances the development of capital markets in economies with comparatively lower levels of FI.

The findings of this research underscore the importance for policymakers and professionals to adopt guidelines and regulations that promote FI and openness. Such measures can bolster the development of strong financial systems by improving access to the formal financial sector, and by contributing to the growth of capital markets.

The study is robust to the use of a multidimensional financial and CMD index. It is one of the pioneering studies that explore the relationship between FI and FO, and how this interaction influences CMD.

This paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.

Symmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.

The findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.

Even though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.

To the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.