The effects of interest rate on economic growth: Further insights from the Gambia

The main objective of this paper is to examine the effects interest rate on economic growth in Gambia over period 1993 2017. Vector E rror Correction Model (VECM) used check relationships between dependent variable (Gross Domestic Product) and independent variables (Real Effective Exchange Rate Real Interest Rate), both short-run long-run. Post estimation tests, including Lagrange Multiplier test for residual autocorrelation were also conducted autocorrelation, as well Jarque Bera stability whether residuals are normally distributed. empirical evidence indicates that there no association Gambian economy but a long run connection runs from real exchange GDP. Based these findings, recommends government through Ministry Finance Economic Affairs prudently manage Gambia’s budget by avoiding unnecessary expenditures could lead deficits.These deficits key drivers cause rates rise, which turn inimical growth.   Key words: Gross domestic product, rate, Error (VECM).